Schroder Unit Trusts has designed a capital protected fund that is linked to the Eurostoxx 50 index over a term of five years and two months.
Schroder secure growth formula is a Dublin-based closed-ended fund that invests in bonds and derivatives to provide capital protection. Investors get their original capital back at the end of the term regardless of the performance of the index, plus 100 per cent of the average quarterly growth in the index. This is calculated by adding together each quarterly average of the index during the term to produce an overall average, which becomes the final level of return.
The fund tracks the Eurostoxx 50 index as opposed to other indices like the FTSE 100 because the European stockmarket has fallen further than other stockmarkets, bringing with it a greater potential for growth. The index is comprised of large European companies like Nokia, L'Oreal and Barclays.
It is likely to appeal to investors who feel that Europe is a good place to invest, but are put off investing directly in the stockmarket because of the risk involved when stockmarkets are volatile.
As the fund tracks the Eurostoxx 50 index without investing in it, investors' capital is protected from downward movements. However, there is a slight element of risk in the underlying investments if the companies issuing the bonds go bust and default on repaying them.
The Eurostoxx 50 rose from 1637.47 points on August 22, 1996 to 3465.73 points on October 22, 2001.