When announcing the launch of the UK Four, Société Générale boldly claims that the structure of these products will help investors “significantly exceed their investment risk and reward expectations” while at the same time “spreading and diversifying their credit risks”.
Awesome foursome…
The UK Four are actually three growth products with a six-year term. Two are based on the performance of the FTSE 100, and one on a combination of the FTSE 100 and S&P 500 indices.
All three spread the counterparty risk evenly (i.e. 25% each) across four financial organisations (hence the name of the proposition, UK Four) listed on the FTSE 100, namely Barclays, Lloyds TSB, Royal Bank of Scotland and Aviva.
A spokesperson for Société Générale said: "Research showed that investors wanted household names. Each institution has either issued their own structured products or been linked to structured products, giving further comfort/familiarity to the IFA community."
The SG UK Kick-out Plan aims to pay a return of 10% per year with the potential for early maturity at the end of any of years two to five, if the FTSE 100 is equal to or greater than at its starting value on 4 October.
While most of the same rules and terms apply for the second product in the series, SG UK Step Down Kick-out Plan, there are two notable exceptions.
Firstly, it aims to pay 7.5% as a gross return.
Secondly, while its kick-out level in year two is equal to the FTSE 100 Index start value, any maturity payment subsequently reduces each year by 5%, to 80% in year six.
…actually a threesome
The third and final product in the UK Four series is the SG UK & US Step Down Kick-out Plan. AS its name implies, its performance hinges on the both the FTSE100 and S&P 500 being equal to or greater than their respective kick-out levels at the end of the anniversary date from years two through to five. Its target gross return is 9.25% and payment at maturity follows the same gradually reducing kick-out pattern as the SG UK Step Down Kick-out Plan.
The products were designed after research on behalf of Société Générale in July this year found that 75% of investors believe the FTSE 100 will be the same or higher over the next six years, while only 3% believe they could see a fall in the UK stock market of greater than 20% over the same time period.
