Gilliat Financial launches kick out plan duo

Gilliat Financial Solutions has launched two products offering investors the choice of investing via a deposit structure or a capital protected structure.

The structured products specialist, part of the Arbuthnot Banking Group, has launched the Gilliat Deposit Kick Out (August 2011) and the Gilliat Protected Kick Out (August 2011).

Both products share identical features but offer investors a choice of investing either in a deposit structure, which would attract income tax, or a capital protected structured, which would attract capital gains tax.

The products feature a descending reference level so the level required for a kick out to occur reduces each year, from 100% of the start values in year one to 80% in year five.

At the same time, Gilliat said the growth payments have a ‘snowball’ feature meaning that from their starting level of 8.5% in year one they increase by the same amount each year.

Adrian Neave, managing director of Gilliat Financial Solutions, said: “The retail market remains attracted to kick out plans as they offer the potential for return of capital after only a year with a coupon considerably higher than cash rates.

“We are constantly being asked for products exposed to the UK only. However, with low volatility and low interest rates, creating a reasonable coupon with commensurate risk has proven difficult.

“By creating the Deposit Kick Out and Protected Kick Out we can offer such exposure in products where the investment capital is not impacted by the performance of the underlying (but is at risk if the counterparty fails) and offer a coupon of 8.5% for each year the investment is held.

“In addition to this, we’ve introduced a decreasing reference level meaning the products can still kick out even with falls in the underlyings”.

Neave said the underlyings make up some 9% of the FTSE 100 and, as a basket, show a correlation of 88% with the FTSE 100 index measured over the last five years.

“We believe that the level of coupon combined with the protection of investment capital could make this a very popular product.”

The underlyings are five stocks from the FTSE 100 are BAE Systems, Marks & Spencer Group, Royal Dutch Shell, Aviva and British American Tobacco.