Product review: Meteor AM FTSE 5 Quarterly Income plan

Structured product provider Meteor Asset Management has made a departure from the standard index-tracking world with the launch of its latest plan.

Rather than base potential growth on the performance of the FTSE 100, the new FTSE 5 Quarterly Income February 2013 plan instead tracks the performance of five FTSE 100 shares: Aviva, BHP Billiton, BP, GlaxoSmithKline and Tesco.

Running for six years, it offers a fixed quarterly income of 2.25 per cent gross throughout the term that is not dependent on how the shares performed.

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Capital is protected at maturity if the value of the shares do not fall by more than 50 per cent of their opening level. The plan falls under income tax rules.

The counterparty to this plan is Morgan Stanley, rated A- by Standard & Poor’s.

It is available as a direct investment, in a Sipp or Ssas, in an Isa or Isa transfer and for trustees and corporate investors. Deadline for investment is 1 February for Isa transfers, 8 February for applications by cheque and 13 February for bank transfers.

Meanwhile, Meteor has also launched its newly developed Kick Start FTSE Autocall February 2013 plan, which runs for a six-year term.

Based on the performance of the FTSE 100, it offers early maturity if, on any measurement day, the index is at least 100 per cent of its opening level. The first measurement date is on the plan’s second anniversary. If it matures after two years, it will pay growth of 20.3 per cent.

From year three onward it pays 28.5 per cent, 36.7 per cent and 44.9 per cent for year five. If it runs for the full six years and the final level is at or above the opening level, the growth payment will be 53.1 per cent.

Capital is protected as long as the index does not fall by more than 50 per cent. The counterparty is Morgan Stanley.

Application deadline for Isa transfers is 8 February, while by cheque it is 15 February and 20 February for bank transfers.

MM View:

It has been a long time since the retail structured products market has seen plans innovative enough to cherry-pick a select few shares from the FTSE 100. Before the financial crisis hit, a swathe of products offered exposure to the major high street banks, while still more focused on energy companies.

Not wanting to be too narrowly focused, Meteor has decided to spread the exposure in the FTSE 5 Quarterly Income plan across five different sectors and five stable companies. For the most part, these are companies that are leaders in the their respective sectors and offer up few surprises to equity markets.

This narrow focus will not be for everyone, of course, but if it is true that financial markets are past the worst of the economic downturn, then this plan could suit a client’s income need.

Looking at its new Kick Start FTSE Autocall plan, the prospect of 28.5 per cent growth in two years, based on the performance of the FTSE 100, could suit the appropriate investor’s needs. While it is unlikely the index will fall by 50 per cent or more in the next few years, we are still not out of the woods yet, so the risks associated with this sort of investment must be remembered.