The Royal Skandia GBP Investec FTSE 100 Defensive Autocall Fund is invested entirely in the UK stock market through a security called the FTSE 100 Defensive Autocall, and can only be purchased through a Royal Skandia Portfolio Bond.
Available solely to UK advisers, the product is designed to generate a 9% return when the FTSE 100 is above a given level on an “autocall date”, a time in which the underlying security may mature before its final date.
'Entirely unique'
Gary Dale, head of intermediary distribution, structured equity derivatives, at Investec, said the product combines the attractive, defined returns of a structured product with the tax mitigating benefits of overseas investment, something which could not previously be done as structured products cannot be held within an offshore bond.
“This is an entirely unique product; there is nothing else like it on the market,” he added.
Head of international proposition at Skandia, Phil Oxenham, said the company has seen a “high demand” for the unique product: “Utilising an offshore bond wrapper together with the pre-defined pay-off profile of a structured investment offers advisers and investors yet more choice in the way they design their investment portfolio.”
The six year fund, initially launched in March, has the annual potential to mature from the end of its second year, provided the FTSE 100 is higher than it was at the time of initial investment. This excludes its sixth year, where it only needs to reach 85% of the FTSE 100's level at the point of the initial investment.
For each year the fund does not mature, an additional 9% return is gained cumulatively, which means the fund has the potential to generate a 54% return, provided it does not mature until its final year.
However, if the FTSE 100 has dropped by more than 50% by the end of the sixth and final year, the investor will lose 1% from their initial investment for every percent it has fallen.
Skandia said the fund is aimed at medium-to-long term clients looking for an investment linked to the performance of stock markets, who do not require regular income and dividends, or an immediate access to money before maturity.
It does not have an annual management charge, but a one-off “establishment charge” of 1.5% will be taken into account when setting returns.
The fund’s current issue can be purchased from 11 August to 3 October, and it can be purchased through Royal Skandia’s International Portfolio Bond, Collective Investment Bond and Collective Redemption Bond.
