The trust is linked to the performance of a basket of three equally-weighted indices – the FTSE100, Dow Jones Eurostoxx 50 and S&P 500 – during a term of six years and six months.
Investors will get a full capital return regardless of the performance of the indices, plus the greater of 20 per cent of their original investment or 65 per cent of the rise in the basket of indices during the investment term.
To calculate the returns the closing level of each index is measured on February 4, 2005. This is compared with the average monthly closing level across the indices during the final year of the investment term.
According to StructuredRetailProducts, Manor Park is currently the only provider to offer offshore products which base returns on a basket of indices rather than the FTSE 100 index. The fund’s exposure to global stockmarkets provide diversification which is a strength, but the problem is that they may not all grow at the same rate. While one way of looking at this is that returns could be boosted, it could also be argued that one index could pull down the overall performance as the basket is equally weighted.
Some onshore providers including Woolwich Plan Managers and West LB currently offer products which are linked to three indices that are retrospectively weighted. They work by offering 50 per cent exposure to the best performing index, 30 per cent to the second best performer and 20 per cent to the worst performer.
This weighted approach could be a useful innovation for offshore products to adopt, but would not add anything where the stockmarkets perform broadly in line..