Structured product provider Manor Park has introduced a version of its guaranteed global growth fund that is linked to stockmarkets in China, Japan and Hong Kong.
Guaranteed global growth fund October 2007 Series D is linked to an equally weighted basket comprising the Hang Seng, Hang Seng China Enterprises and Nikkei 225 indices for five years.
Investors can choose the level of capital protection they require from a range between 80 and 100 per cent. The level of returns, achieved through what is known as a participation rate, will reflect the level of capital protection selected.
Investors who choose the lowest level of capital protection of 80 per cent will receive the highest return with a participation rate of 150 per cent of the growth in the index basket. Investors who choose 100 per cent capital protection will receive the lowest return of 70 per cent of the growth in the indices.
To calculate the returns, an average of monthly readings of the index basket is taken over the final year of the term and this is compared with readings taken at the start of the term. The participation rate is then multiplied by this average to produce the percentage of equity growth, which is then added to the level of capital protection to produce the final return.
For example, investors may choose to protect 80 per cent of their capital, which will result in a participation rate of 150 per cent. If the final year averaging shows the index basket has grown by 60 per cent, this figure is multiplied by 150 per cent to produce a figure of 90 per cent. In this example, investors would receive 90 per cent of the amount invested plus 80 per cent of their original capital – a 170 per cent return in total.
According to the Structured Retail Products adviser website, this product is unique. Royal Bank of Scotland International’s quartet guaranteed stockmarket bond 5 – Asia is similar but differs in that it also has exposure to Korea through the Kospi 200. It also has a slightly longer term of five years and six months.
Giving investors choice in terms of risk and reward is a positive feature but if there is no growth in the index basket by the end of the term, investors risk leaving the product with only the protected amount.