View more on these topics

HSBC International builds with Bric

HSBC International has brought out a capital-protected offshore Oeic that is linked to the performance of the DAX global Bric Index for five years.
Investors in this fund will receive a full capital return at the end of the term regardless of the performance of the index, plus a minimum return of 9 per cent growth.

The fund has potential for growth beyond this, which will depend on the performance of the index. A bonus of 10 per cent is awarded each year for sterling and dollar investors, but for euro investors it is 7 per cent.

This bonus figure is the starting point for the calculation of the returns, as the bonus amount will be increased or decreased by the lowest level of monthly index performance in that year. Any falls in the index greater than 10 per cent will mean that nothing is locked in, but capital will always be protected. The resulting figure is then locked in to ensure any growth cannot be eroded in the following years.

For example, assuming the investment is sterling denominated, investors will be awarded a 10 per cent bonus. If the lowest monthly index performance in the first year is -3 per cent, this brings the bonus down to 7 per cent growth, which will be locked in. If the lowest monthly index performance is 13 per cent in the second year, this will be recorded as zero, so no bonus will be awarded. If the lowest monthly index performance is positive growth of 2 per cent in year three, the 10 per cent bonus is increased to 12 per cent for that year.

At the end of the term, the figures for each year are added together and divided by the number of years in the term – five – to produce an average. This will provide the final return and investors will receive the greater of this figure or the 9 per cent minimum return.

A structured product providing capital-protected exposure to Bric markets with 9 per cent minimum growth could be of interest to some investors who have seen how well emerging markets have performed.

However, the way the returns are calculated for this product could be seen as too complicated and unlike some structured products which have either a participation rate or a fixed return, at the outset investors will have very little idea of the level of return they are likely to see at the end of the term beyond the minimum growth.

Recommended

Mutually exclusive

Building societies Annie Shaw looks at the future for the mutuals in the home loan market following a wave of mergers

1

Nick Conyers retires after 21 years at Pearson Jones

Pearson Jones consultant Nick Conyers is retiring from the industry after a career spanning 27 years. The 51-year-old, a director of the national IFA firm, will leave in mid-January and says he plans to take some time off before deciding on his future. But he is adamant his days in financial services are over saying […]

Lacomp takes to the early stage

The Lacomp British enterprise Fund 7 is an enterprise investment scheme fund that will invest in unquoted companies at an early stage of their development.

1

School fees planning

Jeremy Pearson is Technical Support Manager with Canada Life’s ican Technical Services Team. Canada Life offers a range of wealth management solutions, including retirement income planning, estate planning and investment solutions from a choice of jurisdictions, including the UK, Isle of Man and Republic of Ireland. Many parents value the standard of education offered by […]

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment