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Merrill Lynch HSBC hopes to PIP its rivals

Merrill Lynch HSBC has created the global growth protected investment product (PIP), which is linked to four different indices.

This is the fourth PIP that the company has produced and it has the same structure as a guaranteed equity bond. Over a three-year period it will track the FTSE 100, S&P 500, Eurostoxx 50 and Nikkei 225 indices.

The global growth PIP has been designed to appeal to cautious investors who want to invest in the stockmarket, but who are wary enough of recent volatility to want to protect their capital.

The PIP offers growth of up to 70 per cent of any increase in the four indices. This will be calculated by taking their average closing levels over the third year and combining them to get an average rise or fall. Even if the indices fall, investors will still get their original capital back.

However, the global growth PIP can only be accessed if the client first opens a Merrill Lynch investment and banking portfolio, which may put off some investors. Another potential problem is that if one index fails to perform well, it may drag the average level of return down.

Over the three years from November 16, 1998, to November 16, 2001, the FTSE 100 index went from 5,510 points to 5,291, the Nikkei 225 went from 14,428 points to 10,649, the Eurostoxx 50 went from 3,034 points to 3,762 and the S&P 500 went from 1,163 points to 1,138.

The Merrill Lynch global growth PIP is similar to the capital safe bond from Newcastle Building Society. This also offers a full return of capital and tracks the FTSE 100, Eurostoxx 50 and Nikkei 225 indices. However, the Newcastle product offers a return of up to 85 per cent of any growth in these indices.

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