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Protection deal on DDQ structured product

Dawnay Day Quantum is offering a structured product linked to international investment-grade corporate bonds with an average BBB rating.

DDQ, an offshoot of financial services group Dawnay Day, is seeking to tempt investors away from bond funds with the five-year product, which is targeting a 6.25 per cent yield it hopes will attract £50m.

Managing director Mark Mathias has designed the product using derivatives, giving it a protection level covering the first 5.1 per cent of defaults.

Due to this design, the Dublin-listed product has been awarded an A rating from Standard & Poor&#39s, which is higher than the underlying portfolio. According to DDQ, these underlying investments have an historic cumulative five-year default rate of 2.5 per cent, making it unlikely that investors will lose capital.

Minimum investment is £250,000 but this can be divided among individual investors. There is a 3 per cent initial charge and no commission.

Mathias says: “The bond has a layer of protection inbuilt against any defaults. For an investment-grade bond, this is a significant level of protection.”

Chartwell Investment Management director Patrick Connolly says: “Many investors would be happy with the level of risk but it is complicated and I doubt if many IFAs can get that much money together.”

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