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Gilliat goes digital

Gilliat Financial Solutions has based its 3-year UK digital October 2010 structured product on the performance of the FTSE 100 and S&P 500 indices.

The plan aims for growth and the return of capital at the end of the investment term, which is three years and three weeks.

Investors will receive a growth payment equivalent to 40 per cent of their original investment at the end of the term, provided both indices are at or above their initial values. This means that no growth in the indices are is needed to achieve the return, but if one or both indices fall, no growth payment will be made.

The return of the original capital at the end of the term also depends on the performance of the indices. Investors will get their capital back in full at maturity as long as one or both of the indices do not fall by more than 50 per cent during the term. If they do, the original capital will still be returned in full if the index or indices recover to at least their initial values. If the index or indices do not recover, investors will lose 1 per cent of their capital for every 1 per cent fall in the worst performing index.

As at August 23, 2010, few structured products were linked to the FTSE 100 and S&P indices.  The dual index plan from Walker Crips Structured Investment is linked to those indices but differs from Gilliat’s plan in that it is a six-year product with an early maturity feature that can kick out from year one. If index performance results in a kick-out in the third year, investors in the Walker Crips product will receive 45 per cent growth plus their original capital.

This potential growth payment is 5 per cent higher than the Gilliat product and some investors will like the early maturity feature,. However, others may view the certainty of Gilliat’s investment term as an advantage that a kick-out structure lacks.

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