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Home > Investments > Structured Products

By Marc Shoffman | Published Jun 15, 2012

‘Too much risk, too little return’: FVC Consultants

For a minimum investment of £3000, the vice-president of Morgan Stanley said investors would benefit from the attractive featurs of the Defensive Digital Growth Plan 7 and Defensive Bonus Plan 3.

He said: “The plans’ most attractive feature is their ability to generate returns in a negative market.

“Not all investors share the same opinion as to how long to maintain a defensive strategy so we are offering a defined short term and the potential for a longer investment period to accommodate these views.”

The Morgan Stanley FTSE Defensive Digital Growth Plan 7 is a two-year product that aims to repay 12 per cent to investors if the FTSE 100 has not fallen by more than 15 per cent at maturity. If the index has dropped lower than this, no growth return is generated but capital will be returned in full as long as the index has not fallen by more than 50 per cent on the maturity date.

The Defensive Bonus Plan 3 is a six-year plan that offers 11.5 per cent a year provided the FTSE is at or above 90 per cent of its initial level.

In an analysis note from specialist investment adviser FVC Consultants, it said: “Plus points are that the Morgan Stanley fund has potential early returns of 11.5 per cent a year, not compounded.”

However, the FVC note only gave the product a return rating of 5.83 out of 10, believing it to be taking slightly too much risk for the actual return gathered.

The note added: “Investors’ capital is not protected at maturity if the 50 per cent protection barrier is breached - as observed at maturity only. Also, any index growth above the return level is not passed on to the investor.”

All three plans close for investment on 26 July 2012, except for Isa transfers, which close on 12 July 2012. The plans strike on 16 August 2012.

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