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No growth required for Blue Sky

Blue Sky Asset Management has created a six-year FTSE 100 linked structured product that requires no growth in the index for investors to receive a 25 per cent minimum return.

Blue Sky enhanced growth plan – FTSE 100 series II provides the greater of double the growth in the index, capped at 90 per cent of the original investment, or 25 per cent of the original investment provided the index is at or above its initial value at the end of the term.

Investors will also get a full capital return provided the index does not fall by more than 50 per cent without returning to at least its initial value by the end of the term. If this safety net is breached, investors will lose 1 per cent of their capital for each 1 per cent fall in the index.

To calculate the returns, the closing level of the index is recorded on the first day of the term and compared with the closing level of the index on the final day of the term. If the final index level is at or above its initial value, investors will qualify for the 25 per cent minimum return. However, if the index has risen above its initial value, an average of the closing levels during the last six months of the term will be calculated. If double this amount is higher than the 25 per cent minimum return, investors will receive this higher return, subject to the 90 per cent cap.

A minimum return or double the growth in the index could appeal to some investors who can accept the risk of capital loss if the 50 per cent protection barrier is breached. However, the cap on returns means that investors will not benefit from index growth above 45 per cent, which could put off some investors.

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