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Product matters

Quite why New Star feels the need to launch structured products on to a crowded market is beyond me at the present time.

A firm that raises £800m in one year does not need the extra few million pounds that this sort of product raises.

The income or protected capital plan is similar to many other structured products on the market.

This one offers the choice of income or growth – 10 per cent annual income or a maximum of 55 per cent growth over the five-year term.

It use the 50 stocks of the Dow Jones Global Titans index as its base.

The problem with many of these investments is that it is not,in theory, difficult to lose money.

If you are basing an investment on a set basket of 50 stocks, and only five (or six with the growth option) can be more than 30 per cent down, there is a fair chance that investors could lose money.

Just look at how many of the FTSE 100 have lost that and more in the last few years, Marconi and Colt are just two examples.

Income-seekers have to get used to the fact that wanting 10 per cent income puts a considerable strain on capital preservation.

Growth investors should remember that New Star have assembled a team of quality active fund managers. Investors who want stockmarket exposure through New Star for the long term should invest with quality managers such as Tim Steer, Toby Thompson and Stephen Whittaker rather than invest in structured products.

Ben Yearsley is an investment manager at Hargreaves Lansdown


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