Investors in Goldlocks will benefit from the inflation protection and growth potential of gold, while capturing currency movements through the computer driven currency program.
Insch says it developed the product by asking what is the most that investors can stand to lose. It says that the bigger the loss, the harder it is to make up for the lost ground. Investing in gold alongside a currency enhancement program should ensure capital is preserved and its value protected against inflation, without losing the potential for growth.
Structured products linked to the GoldLNPM index will make up 80 per cent of Goldilocks. These will be issued by a range of financial institutions that are rated A by Moody’s or A2 by Standard & Poor’s or Fitch. Examples of potential issuers who meet the criteria are ING, ABM Amro and Societe Generale.
The structured products will provide 100 per cent growth in the rise of gold prices if prices rise between 20 and 120 per cent after five years.
The currency program treats currency as an asset class that can generate gains and losses. It will be geared by four times, which means three times the original amount is borrowed to invest alongside the original amount. However, a 50 per cent stop loss will be triggered to protect half of this part of the portfolio
Goldilocks will provide 90 per cent capital protection overall. Investors are fully protected on 80 per cent of their investment through the structured products and the protection on half the remaining 20 per cent through the stop-loss brings the total to 90 per cent. Stop losses are used to protect investors from further losses when trades have gone against them.
This product could be useful for sophisticated investors who are looking for something different in the search for diversification but who also want to preserve the majority of their capital in the worst case scenario. However, some investors may find the currency trading element difficult to understand.