Standard Life has brought out the secured capital plan, a capital-protected Oeic established under the European Ucits III legislation.
The fund is linked to the FTSE 100 index for a term of five years and 48 days and will replace Standard Life's range of guaranteed bonds. The fund resembles guaranteed equity bonds in that it has a specified investment term, at the end of which a full capital return is provided regardless of index performance. It will also provide 82.4 per cent growth in the index. However, unlike guaranteed equity bonds, share values will be published daily, giving the product greater transparency.
Although the plan is open-ended it will be available in tranches which have a limited shelf life. Investors can sell their shares at any time within one month of the investment term, but the minimum they can cash in is £1,000. At least £2,500 must remain invested to continue with the investment, otherwise the total investment will be cashed in. Cashing in part of the investment will reduce the capital protected amount and full encashment may mean investors get back less than they put in.
Open-ended structured products are not a new idea but Standard Life's product is unique. Many existing funds have no specific term as capital is protected from index falls on a rolling basis or a percentage of the gain is locked in.
The new product is likely to appeal to cautious investors who want more transparency and flexibility than capital protected or guaranteed bonds, without the risks to capital that conventional Oeics have. However some investors may feel the capital protection is expensive as the participation rate and relatively high initial charge will impact on returns.