This capital-protected fund is linked to the performance of the FTSE 100 index over a three-year term and offers investors a choice of capital protection and return.
Protecting 85 per cent of the original capital means investors will get geared exposure of 225 per cent of the growth in the index. Protecting 90 per cent of the original capital gives a return of 175 per cent of the rise in the index, 95 per cent protection results in a return of 125 per cent of the rise in the index and 100 per cent capital protection provides 75 per cent of the growth in the index.
To calculate the returns, the closing level of the FTSE 100 index at the start of the term is measured against the average monthly values taken over the entire three-year term.
Most structured products are designed to be held for at least five years and according to the Structured Retail Products website there are few offshore products with a three year term. Some IFAs and providers feel that a three-year term is too short as it exposes investors to short-term market volatility. However, not all investors will want to tie up their money for five years.
Bank of Ireland Isle of Man is offering its guaranteed FTSE bond with a three-year term, providing 100 per cent capital protection along with 90 per cent of the rise in the FTSE 100 index. Although the return is higher than that available with Manor Park’s 100 per cent capital protection option, the Bank of Ireland product does not offer a range of capital protection options that make geared returns possible.