Premier Fund Managers has introduced a Dublin-based closed-ended fund that is linked to the performance of the FTSE 100 for five years.
The Premier income and growth plan gives investors a choice of annual income of 7.5 per cent, monthly income of 0.6 per cent or growth of 42 per cent at the end of the term. Investors will also get all their original capital back, providing the FTSE 100 index does not fall by more than 25 per cent. where this does happen, investors will get their capital back in two situations.
The first is where the index falls beyond 25 per cent during the term, but recovers to at least its starting level by the end of the term. The second is where the index rises by 40 per cent or more at any time during the term, which will override a fall of 25 per cent even if the index fails to recover by the end of the term.
Where the index falls by more than 25 per cent, without rising by at least 40 per cent at any point, and fails to recover by the end of the term, the capital will be reduced. Investors will lose 2 per cent of their capital for every 1 per cent fall in the index.
To calculate the final returns, the closing value is recorded on April 30, 2002 and is compared with the lowest closing level of the index during the last six weeks of the term.
Although the product offers some degree of capital protection, investors should note the risk of significant capital erosion. However, a 40 per cent rise in the index at any time would lock in the capital protection feature and this could soften the blow if the stockmarket recovery gathers pace.