UK-based Barclays Wealth has launched Target Growth Plan which will pay a return of 50% plus full repayment of capital as long as the FTSE 100 has not fallen by more than 50% at maturity.
Barclays Wealth has said that in a change from the preceding series, the company has moved to further mitigate the risk of capital loss by creating a structure in which the capital at risk barrier is only observed at maturity, rather than throughout the life of the plan. This means investors will receive both the 50% target return and full repayment of capital as long as the FTSE 100 is not lower than 50% of its starting level at the maturity date.
Index performance before this date has no bearing on the potential 50% return or the repayment of capital. In the event of the FTSE 100 closing below 50% of its starting level at maturity, both capital and the return will reduce 1:1 with the index. The plan is open between March 30, 2009 and May 29, 2009.
Colin Dickie, director of Barclays Wealth, said: The first issue of our Target Growth Plan had the same large safety margin but to further mitigate the risk the new issue will only observe the capital at risk barrier at maturity. This means index performance only becomes relevant on the final day of the plan — the index can fall by any amount in the interim without putting capital at risk.
We think a 50% target return after five years is a very attractive proposition in the current market, particularly as the plan is structured to combine both the capital and the return in the event of the index finishing below 50% of its starting level. This scenario would usually wipe out returns completely but the Target Growth Plan simply reduces the 50% return in line with the index, giving investors a higher total payout.
