This is a capital-protected multi-asset class fund that provides exposure to an equally weighted portfolio comprising the FTSE 100, S&P 500, FTSE Epra and Dow Jones AIG commodity indices alongside the Lyxor alternova tracker hedge fund. This hedge fund is managed by Lyxor Asset Management, a subsidiary of Societe Generale
Investors will also get their original capital back, less any initial charge that is made to pay IFA commission, at the end of the five-year term.
The calculation of the final return is dramatically different to other structured products. At the end of each year, the value of the best performing asset is recorded and locked in, so it will remain at the same level for the rest of the term. This happens for each asset class, so that by the end of the term, the value of all of the assets will be locked in.
The intention is that investors will benefit from different market cycles, so they can lock in gains made early on while being protected from dips in the asset classes during the latter stages of the term.
At the end of the term an average of the value of the underlying asset classes is produced for each year and investors will receive a final return equivalent to the highest of these figures, plus their original capital.
Diversification – particularly through access to the hedge fund market – and the ability to lock in spells of strong performance for each asset class are unusual features that could be useful to investors. Theoretically, different asset classes should perform well at different times, so exposure to a multi-asset portfolio should ensure investors are covered for all market conditions, with the added comfort of capital protection.
However, the method of calculating the returns is more complicated than some structured products, which could put some investors off. Another potential drawback is that if an asset class performs better than the others early on, the automatic lock in will mean that any subsequent rise in value will be ignored during the calculation of the final returns.