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Morgan Stanley adds defensive plan to its stable

The FTSE defensive bonus plan from Morgan Stanley IQ is one of three structured products that the firm has recently added to its stable.

As the name suggests, the plan is linked to the performance of the FTSE 100 index for six years but could kick out from year two depending on index performance.

Investors will receive 9 per cent growth for each year the plan stays invested but as the kick-out feature only applies from year two, the lowest level of growth is 18 per cent. This will be paid to investors along with their original capital provided the index does not fall by more than 10 per cent

If the index falls by more than 10 per cent at the end of year two, the plan will continue until the next year and so on. The potential returns are 27, 36, 45 or 54 per cent plus the original capital from years three to six respectively. Investors can choose to continue with the plan if an early kick-out is triggered but will have no further exposure to the index.

Capital protection is also provided, with investors receiving a full capital return provided the index does not fall by 50 per cent or more by the final day of the term.

This plan is one of the preferred plans on the StructuredProductReview IFA website. The firm says the year two option of Barclays’ latest defined returns plan (annual kick out) offers the same potential return of 9 per cent for each year invested. But this return is payable only if the index closes at or above the initial level on any anniversary from year two onwards. The Morgan Stanley plan is more defensive in its kick-out terms, allowing the index to fall by up to 10 per cent. StructuredProductReview says this as a function of its higher counterparty risk compared to Barclays.


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