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Meteor ties to twin indices

Meteor Asset Management has brought out a capital-protected bond linked to the performance of the FTSE 100 and Dow Jones Euroztoxx 50 indices for 10 years.

The prima plus plan is based around a kick-out structure, which means it has the potential to mature early at every anniversary during the term.

In year one it offers a potential return of 16 per cent of the original investment if both indices are at or above their initial values. If one or more index has fallen, the plan will rollover to the following year, at the end of which a return of 32 per cent is payable depending on the performance of the indices. The returns will increase by 16 per cent a year until year 10, when a return of 160 per cent is payable.

Investors will also receive a full capital return unless either index falls below 50 per cent of its starting level and does not recover by the end of the term in April 2018. If this safety net is breached, investors will lose 1 per cent of their capital for every 1 per cent fall in the worst performing index.

This product is unusual due to its 10-year term, although the early kick-out feature at every anniversary means it unlikely that it will run to maturity. Meteor believes the plan is ideal for current market conditions as it offers the equivalent of 16 per cent a year for little or no growth in the indices. The soft protection of 50 per cent may be unappealing to some investors who prefer the security of full capital protection, but as one or more index would need to halve over the next 10 years before capital is at risk, some investors may feel they have all the protection they need.

However, while the returns are predictable with this plan, the investment term is uncertain. Although it is unlikely the product will run full term, some investors may be put off by the possibility than it could run longer than the five or six-year norm.


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