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Morgan Stanley launches UK Govt gilt-backed structured product

Morgan Stanley has launched a new structured product backed by UK Government gilts.

According to the firm, the FTSE defensive gilt-backed growth plan is the first retail structured product to be both cash collateralised and backed by UK Government gilts.

The plan offers a pre-defined return of 9 per cent per year, paid as long as the FTSE 100 index does not fall by more than 10 per cent on each annual anniversary of the plan, for a maximum of three years. It also includes a 50 per cent soft protection barrier, observed at maturity only.

The bonds purchased to secure the capital protection for the plan are Standard & Poor’s AAA rated UK government bonds.

Morgan Stanley also uses collateral arrangements to minimise credit risk exposure by posting cash into a segregated account on a daily basis to secure the returns created by the derivative.

The plan is available for direct investment, Sipp/Ssas investors, Isa investments for 2008/2009, transfers of existing ISAs and discretionary investment with a minimum investment is £3,000.

Morgan Stanley executive director for structured products Marc Chamberlain says: “As credit risk concerns become more important, we believe we have developed a product drawn from our experience in the discretionary market, as well as direct feedback gathered from financial advisers, which offers retail investors a high degree of credit risk protection, yet still provides potential for excellent returns.”


Dividend trips

In a world where interest rates are close to zero, sources of high and sustainable income will be increasingly rare this year and should attract a premium value. Dividends can meet this need but investors have to be vigilant as there will be widespread dividend cuts.


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