Type: Growth plan
Aim: Three-year investment which is designed for investors with a neutral, slightly positive or even slightly bearish view on UK equity markets over the medium term
Minimum-maximum investment: Minimum £3,000 and maximum £7,200 for Isa (no maximum for direct investments)
Term: 3 years
Return: Pre-defined returns of 9% per year, subject to certain conditions
Options: Eligible for pension portfolio investment within a Sipp or Ssas, 2008/09 and 2009/10 ISA investments, ISA transfers and direct investments
Guarantee: Original capital is returned in full, provided the index does not fall by 50% or more at maturity. Otherwise your capital is reduced by 1% for each 1% the index has fallen
Closing date: April 8, 2009 and Isa transfer March 20, 2009
Commission: 3% initial
Tel: 020 7425 5112
The Morgan Stanley FTSE defensive gilt-backed growth plan is a three-year kick out product. If at the end of any year the level of the FTSE 100 is equal to or more than 90 per cent of the start level, the plan terminates and the investor receives a return of capital plus 9 per cent a year for each year the plan has been live.
However, if there has been no kick out then the investor will receive 9 per cent each year for the whole term plus full return of capital, provided the FTSE 100 index has not fallen by 50 per cent or more at maturity.
Director of Baronworth Colin Jackson says: “The literature is written in very simple terms and easy to understand.” He also finds the yearly return of 9 per cent extremely attractive, particularly as it will be subject to capital gains tax, allowing investors to utilise their capital gains tax exemption.
Jackson points out that the plan invests in preference shares where UK Government bonds are used to help secure the returns. Additionally, the issuer of the preference shares enters into a derivative contract with Morgan Stanley. He says: “Utilising UK Government bonds will be very reassuring to investors in the current financial climate.”
This is a product that will almost certainly appeal to investors who are looking for growth only, are prepared to accept an element of risk but in return receive an attractive level of growth.
For Jackson the adviser remuneration of 3 per cent is in line with the market but he says there is no trail commission.
Other features that Jackson likes include “the fact that the return of capital is dependent upon one index only – in this case the FTSE 100.”
There are a number of other kick out products but, currently, for Jackson “this seems to be the best of the bunch”.
In summary, there is nothing in this product that Jackson does not like. He says: “It could be said that this is a good time to invest in a product of this type as the Index is low.”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Good