The Conditional Quarterly Autocall Issue 10 a new structured product invests in both the FTSE 100 and the Euro Stoxx 50 indices.
The investor will receive an income payment of 2.05 per cent for each quarterly measurement date that the closing level of the relevant indices are at least equal to 80 per cent of their opening levels.
The income is paid gross. If the closing level of either index is below 80 per cent of the opening level on a quarterly measurement date, no income will be paid for that quarter.
Once the plan has matured, no further income will be paid.
The plan will mature early if the closing level of the both indices are at least equal to 105 per cent of their opening levels on any quarterly measurement date from 16th of September 2019.
If this happens, the investor will receive the income payment for that quarter, and the repayment of their original investment in full at this point.
Hilbert will charge a one-off distribution fee of up to 1.5 per cent to cover its costs for marketing the plan. No part of this fee will be used to pay a financial adviser.
Hilbert founder Steve Lamarque said: “We’ve found that dual index structured products such as the Conditional Quarterly Autocall are becoming popular with investors in the UK as they tend to provide a higher return for those who seek it.”
Ian Lowes, managing director at Lowest Financial Management in Newcastle, who also runs Compare Structured Products said: “Structured products have been consistently popular with our clients (because we recommend them).”
He added: "While there is no easy way to produce high income we have not been a fan of income contracts that have conditional parameters to the extent that they may stop paying income, potentially for a long time.
"This particular contract will pay a very high level of income provided both the FTSE 100 and Eurostoxx 50 indices trade within 80 per cent and 105 per cent of the levels recorded at commencement of the plan.
"If however, one index is below the 80 per cent level on a quarterly observation date no income will be paid for that quarter. While the indices rising away from that threshold will reduce the risk of no income being paid, if both are more than 5 per cent higher on any quarterly observation date, after the first year, the plan will terminate returning original capital. "
He said the "perfect scenario for this plan" would be if both indices traded above 80 per cent of the start level and at least one traded below 105 per cent.
Mr Lowes added: "Obviously no-one can accurately predict future markets but the implications of Brexit and other issues could see the correlation between the two indices diverge.
"This could prove beneficial if it causes one index to remain below the 105 per cent threshold for the long-term. If however it results in one index falling more than 20 per cent and staying down, the investment won’t fair well at all.
"While my personal expectation is that the investment will terminate, returning capital long before the end of the 10-year term, having paid most, if not all of the income throughout, it is not an investment we will be exposing clients to."
david.thorpe@ft.com
