Investments 

Review website refuses Castle Trust on counterparty concerns

Specialist structured product review website StructuredProductReview has refused to list a product offered by property-related investment specialist Castle Trust, saying that despite similar characteristics they are not structured products and are too high-risk.

Ian Lowes, founder of StructuredProductReview.com and director of IFA firm Lowes Financial Management, said he was approached by Castle Trust to put the HouSA investment on the website, but that he feels the investment is too high-risk and lacks the backing to act as its own counterparty.

HousSA provides defined returns referenced to the Halifax House Price Index that are delivered within a defined time frame. No third-party counterparty is used and Castle Trust acts as counterparty for the investments.

Castle Trust denied that it had approached the websites regarding a listing and said “independent analysis” provided evidence of its adequate capital reserves.

A spokesperson said: “We have not asked for HouSAs to be featured on StructuredProductReview.com.

“Independent research by actuarial consultants AKG has confirmed that Castle Trust’s tier 1 capital ratio will always be at least 20 per cent, which is double that of the major banks.

“Investors are covered by the Financial Services Compensation Scheme for losses up to £50,000 in line with all other qualifying investment products.”

Mr Lowes said: “The requirements in order that they can meet all of their obligations are far from straightforward. The company has a certain amount of reserves and contingency plans but if these, particularly given their relative financial strength, prove inadequate investors could end up losing some or all of their investment capital.”

Mr Lowes said that the Castle Trust products look like structured products and meet the existing definition used on his websites, which has prompted him to revise the definition.

Thus a structured product is now defined by StructuredProductReview as: “An investment backed by a significant counterparty (or counterparties) where the returns are defined by reference to a defined underlying measurement (such as the FTSE 100 index) and delivered at a defined date (or dates).”

Mr Lowes said: “My biggest concern is that if this venture fails, claims will land on the Financial Services Compensation Scheme and yet again it will be firms such as ours that chose not to sell these products who will end up picking up the bill for those that do.”