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Second outing for Morgan Stanley’s booster

The second issue of Morgan Stanley IQ’s FTSE booster plan provides a fixed return of 60 per cent growth, plus a full capital return, provided the FTSE 100 index does not fall by more than 20 per cent over the term.

The plan’s booster feature will kick in if the index falls by more than 20 per cent. This feature calculates index performance on the final value of the index relative to its initial value rather than the percentage of the fall. This figure is then doubled to provide a total return. So if the index falls by 30 per cent, the final level of the index would be 70 per cent of its initial value. The booster feature would calculate the return as two times 70 per cent, which is 140 per cent. This would represent a full capital return plus 40 per cent growth.

When the index falls by more than 50 per cent, the booster feature will provide capital protection. If the index falls by 65 per cent, the final value of the index will be 35 per cent of its initial value. Using the booster feature, this would produce a 70 per cent return and investors would lose 30 per cent of their original capital.

Merchant Capital’s growth plan: FTSE bull & bear achieves also has the potential for positive returns if the index falls. It provides a return equivalent to 1.25 times any growth in the index or 100 per cent of any fall in the index up to 50 per cent after six years and three weeks.

To match the Morgan Stanley plan’s 60 per cent fixed return, the Merchant Capital would need the index to grow by 48 per cent. Higher returns are possible with Merchant Capital’s plan, but the drawback is that investors are fully exposed to falls of more than 50 per cent, which are cushioned by Morgan Stanley’s booster feature.


Standard Life appoints new platform head

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Prudential chairman Harvey McGrath to retire

Prudential chairman Harvey McGrath is to retire from his position next year once a successor has been found. McGrath was appointed as a non-executive director in September 2008 and became chairman of the board and the nomination committee in January 2009. Prudential has appointed Kaikhushru Shiavax Nargolwala and Alistair Johnston as independent non-executive directors with […]


FSA to tighten up interest-only rules and ban self-cert

The FSA is proposing that lenders must assess affordability for interest-only loans on a capital and interest basis unless the borrower has a “clearly understood and believable” way to repay the mortgage. In its first formal consultation on interest-only mortgages in today’s final MMR consultation paper, the FSA says exceptions to the rule would be […]


CII exams hit by more IT problems

Almost 100 advisers were unable to sit their Chartered Insurance Institute exam last month due to problems with the exam software, with up to 744 advisers hit by system delays. The CII uses City & Guilds IT system to run its exams. On November 28 advisers experienced problems with the IT system running slowly. Out […]

Tax year-end planning with the family

From the Technical team at Prudential Let’s face it, many aspects of financial planning involve a lot of technical detail. At our face-to-face events, we’ve had great success bringing these technical topics to life through the use of practical case studies. Meet the family Prudential’s Planning Matters hub brings together a fictional family and explores […]


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