View more on these topics

Gilliat builds income

The November 2010 issue of Gilliat income builder is a FTSE 100-linked structured product that aims to pay a variable quarterly income of up to 1.8 per cent during the investment term of six year and two weeks. This equates to an annual income up to 7.2 per cent.

The income payments depend on the closing levels of the index on each day during each quarter and are based on the number of days in the quarter that index closes higher than 3,000 points. This works through a series of options that pay a fixed coupon of 0.027 per cent for every day during the term that the value of the index is greater than 3,000 points. This means the maximum income possible during the term is 43.2 per cent.

The capital return is dependent on the index performance on the final day of the term, so what happens to the index during the rest of the term does not affect the capital return. If the index value at the end of the term is less than or equal to 3,000 points, investors will lose 1 per cent for every 1 per cent fall in the index from its initial value.

Gilliat says it has taken 3,000 points as the basis for the calculation of income payments and the repayment of capital because it gives clarity to investors, who can follow the value of the index each day by looking at this data in newspapers. Many structured products are based on an index not falling by a specific percentage, such as 40 or 50 per cent, but Gilliat says it may be difficult for some investors to understand what the percentage relates to.

The maximum income available from income builder is higher than income plans from providers such as Barclays Wealth, Morgan Stanley, Merchant Capital and Investec. However, investors will not necessarily achieve the maximum annual income of 7.2 per cent and its variable nature may not suit all investors. One of the competitor products may be better suited to the needs of some investors.

Recommended

1

CSR: Govt doubles Whitehall cost savings to £6bn

The Government has earmarked £6bn of Government back office cost savings as part of its comprehensive spending review, double the £3bn worth of savings it originally set out to achieve. Chancellor George Osborne has told the House of Commons that the Government will deliver a £6bn reduction in government costs over the four-year period covered […]

Check emails as well as social media comply with FSA rules

Advisers are being warned to ensure their emails to clients comply with the FSA’s financial promotion rules. In an industry update in June, the FSA told firms that its financial promotion rules extended to the use of new media such as Twitter, Facebook, online forums, blogs and mobile applications. The regulator said that rules generally […]

Hendry slams fund axe

Eclectica Asset Management chief investment officer Hugh Hendry has slammed the recent decision by Hargreaves Lansdown to remove the £109m Eclectica agriculture fund from its Wealth 150. Hendry insists that the Eclectica Asset group’s performance has been strong. He says: “I find it hard to accept criticism for an agriculture fund because it does not […]

3

Bank of England governor warns UK facing ‘sober’ decade

The Bank of England governor Mervyn King has warned that the UK is set for a ‘sober’ decade as it looks to recover from the financial crisis. Speaking to the Black Country Chamber of Commerce on the eve of the Spending Review, King said that the next decade would be defined by “savings, orderly budgets […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment

    Close

    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm

    Email: customerservices@moneymarketing.com