75% of vehicles are based on uk blue chip index, says Future Value's Tim Mortimer
Providers have released a slew of structured products linked to the FTSE 100 as the UK blue chip index continues to prove popular with product developers.
Premier, L&G, Britannia International and two building societies all launched FTSE 100 products last week with terms of five to six years.
Ben Yearsley, adviser with intermediary Hargreaves Lansdown, said the market appears over-supplied with undifferentiated index-linked products.
'They are all getting the underlying rates from the same investment banks, with the same pricing, so they all look pretty similar,' he added.
Tim Mortimer, managing director of structured product consultancy Future Value Consultants, said around 75% of structured products in the market are now based on the FTSE 100. The Eurostoxx index, which formerly rivalled the FTSE for popularity, has been used for fewer products since last year, probably due to the relatively poor performance of European markets.
Premier Fund Managers last week came out with Premier limited Editions Number 11, a six-year growth product based on the FTSE 100 index.
The plan offers potential growth of 7% per year even if there is no growth in the underlying index and can mature early at the end of the first, second, third, fourth or fifth year if the index is at or above its start value on any of the plan's anniversary dates.
Thus, if the index is at or above its start level at the end of the first year, the plan matures and 107% of initial capital is paid to investors. If the index is below its start level, it continues for another year, after which it matures and pays out 114% of initial capital if the index is at or above its start level, and so on for six years.
If the plan reaches the final maturity date and the final index value is below the start value, investors receive 100% of capital provided the index has not fallen by 50% or more at any point during the term, in which case capital is reduced by 1% for every 1% the final index value falls short of the start value.
The product is available for Isa and Pep investment as well as Isa and Pep transfers. Minimum investment is £5,000 and the offer period runs from 1 September to 20 October.
Legal & General is offering a five-and-a-half-year product linked to the FTSE 100. The Protected Index Plan Five provides growth in the index up to a maximum of 55%, equivalent to potential growth of around 8% per year.
At the end of the fixed term, investors should receive capital growth in the index as measured between the average level of the first and final six-month periods, plus their original capital.
Capital is protected if the product is held to maturity. L&G lends the money to A-rated investors and return of capital depends on them not defaulting on repayment.
The product is available as a mini or maxi Isa, Pep transfer or direct share investment. Minimum investment is £1,000. Commission is 3% and the plan is open for investment from 18 August to 10 October.
Britannia International has launched the Optimum Growth Bond, a five-and-a-half year product linked to the FTSE 100. The vehicle has an early maturity facility, whereby if the index has risen 31% or more after three-and-a-half years, the product closes and investors receive a return of 31% gross.
Minimum investment is £10,000 for new customers or £5,000 for existing clients and it is available from 1 September.
Yorkshire Guernsey Limited, the offshore subsidiary of Yorkshire Building Society, is launching an equity-linked bond that guarantees to pay interest equivalent to growth in the FTSE 100 over five years while protecting capital. Available from 8 August, the bond pays interest of 4% until the start of the five-year period on 1 October.
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