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Aviva in structured fund launch
GROWTH FUND
Type: Structured products
Description: Aviva Investors has launched the six-year term Defined Growth Fund 3, a structured product offering a return of 11 per cent each year. It has been aimed at investors looking for potential returns but with the risk of losing a substantial proportion of initial investment at maturity.
If the average FTSE 100 closing price, taken on each of the 10 business days before and on the potential annual maturity date, is higher than the closing price on the strike date of 17 February 2012, the fund will mature early.
The fund is invested in securities and derivatives from six financial institutions. The initial investment will be returned provided the index has not fallen by more than 50 per cent without returning to at least its initial value.
Conditions: The closing date for the offer is 10 February 2012. Minimum Isa investment is £500, for a lump-sum the minimum is £1000. There is an initial charge of 6.1 per cent.
If the 50 per cent barrier is breached at any time during the product term, the capital returned will be reduced on a one-for-one basis for any fall in the final index level at maturity compared with the initial index level.
Contact: www.avivainvestors.com
Verdict: Iain Wishart, proprietor for Wishart Wealth Management, said: “Risk and reward are always linked. The investor’s capital is at risk at maturity if the 50 per cent barrier is breached at the closing level of any day during the product term. Any growth in the index above the maximum return level is not passed on to the investor.
“And given recent banking collapses, who is to say the counterparties are going to be around for the next six years? Many investors will be sold on the kick-out, 11 per cent feature. That said the FTSE 100, as with other markets, has a bad habit of surprising us and a six-year term may prove too long for the very type of investor this plan is aimed at. Investors not wanting to risk their capital should avoid this plan.
“We do not recommend structured products to our clients. Recently failed precipice bond products from Lehmans, AIG and Keydata have done nothing to change my mind on this type of investment.”
Rating: one star out of five
