Morgan Stanley has established the FTSE Protected Growth Plan, a capital-protected bond that could mature half-way through its six-year term.
The bond is linked to the performance of the FTSE 100 Index and provides a return of the original capital regardless of stockmarket movements. If the index rises by at least 30 per cent by the third anniversary, the product matures and pays out 30 per cent gross plus the original investment. There may be an opportunity for the investment to continue after this point but this will depend on terms that are offered by Morgan Stanley at the time.
If the index does not meet the 30 per cent early release trigger, the investment will run for the full six years. Investors will then get a full capital return plus 120 per cent of the rise in the index, based on averaging over the last 12 months of the term.
Nvesta's secure tracker plan has an optional early release feature that is identical to the Morgan Stanley product. Investors who select the early release version at the outset will get 30 per cent growth plus their original capital back if the index has risen by at least 30 per cent.
The difference between the two products is that where the Nvesta
product runs for the full six years, investors will get 105 per cent growth in the index which is 15 per cent less than offered by Morgan Stanley.
However, some IFAs may feel that an early release feature limits growth potential for their clients. The Nvesta product is able to cater for them as well as those who like the idea of getting their money early, while the Morgan Stanley product lacks this flexibility.