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Thousands of L&G structured product investors hit by Lehman fallout

Legal & General has written to over 2,000 clients with structured products backed by Lehman Brothers warning them that up to 20 per cent of their investment may be at risk.

Last week, the firm wrote to investors who held the Legal & General accelerated growth investment plan 2 or the L&G protected capital and growth plan 4 to alert them that the performance of their investment may be impacted by the bankruptcy of Lehman Brothers, which was one of the underlying counterparties to the plan.

Advisers have questioned why clients were not alerted to the Lehman’s exposure months ago when the investment bank was liquidated. Meteor Asset Management, NDF, DRL and Arc all confirmed they had invested in securities issued by various Lehman Brothers subsidiaries within weeks of the bank filing for bankruptcy. An industry source says: “Why’s it taken so long? They obviously wanted to keep their heads down.”

The letter to affected clients reads: “At least 80 per cent of your original investment is still protected at maturity, subject to the continuing financial security of the remaining institutions; and the investment continues to offer potential for growth, however this may be lower than was stated in the original brochure.”

The collapse of Lehman Brothers means that investors could stand to lose up to 20 per cent of the capital protection offered by the two plans if the FTSE 100 finishes below 5229.60 by maturity in July 2011.

More details to follow.


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