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Incapital on the defensive

Incapital Europe has introduced a structured product that has the potential to provide growth even if the index to which it is linked falls by up to 30 per cent.

The digital growth plan – defensive series 1 is a four-year FTSE 100 linked plan that provides a fixed return of 30 per cent growth provided the index does not fall by more than 30 per cent at maturity.

A fall in the index greater than 30 per cent will mean investors do not receive the 30 per cent fixed return, but they will still get a full capital return provided the index does not fall by more than 50 per cent by the final day of the term. Falls of more than 50 per cent will result in the reduction of the original capital by 1 per cent for each 1 per cent fall in the index, but this barrier offers more protection than products that monitor index falls throughout the investment term.

Incapital believes the defensive quality of this product in providing a return even if the index falls by up to 30 per cent might appeal to investors given current market volatility. The firm points out that the FTSE 100 fell 7.23 per cent in August and at September 5, it was down 16.4 per cent from its high on February 21.

The plan is not available for Isas, which may limit its appeal to some clients. However, it has made the preferred list of the Structured Product Review IFA website, which says: “The new Incapital digital growth plan offers a potential solution for those with a shorter investment term or as a complement to five and six-year termed investments for capital gains tax planning.

The 30 per cent gain is payable even if the FTSE falls by up to 30 per cent over the term but it should be appreciated that the shorter term reduces the opportunity for the FTSE to recover in the event of adverse market conditions.”

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