WestLB has structured a FTSE 100-linked investment product with knockout options, and a GBP5,000 (USD9,187) minimum investment to make it attractive to retail investors. So-called callable investment products, which mature early providing the underlying asset rises by a set amount, have been popular with private banking clients and with other asset classes, such as interest rates, but have not typically been marketed to retail.
Thorsten Wegener, head of equity market sales at the firm in London, said the product is attractive to retail clients because they tend to think short-term with their investments so the possible early maturity, along with full capital protection, should appeal. Structuring a FTSE tracker with knock-out options allows WestLB to pass on higher returns to investors and also pay more commission to independent financial advisors for distributing the product, he explained.
The product closes to new investment Oct. 21. If, after two years, the index has risen by 7% or more, the investor receives a coupon of 14%. If not, the product continues for a year, paying a 21% coupon if the index rises 10%, 28% after four years and a rise of 14%, or 35% after five years and growth of 17.5%. If the product continues to its six-year term, the investor's capital is returned with 100% of the index's growth over the period.