Scottish Equitable is readying its first capital-protected investment product. The structure will use constant proportion portfolio insurance to provide capital protection, with assets being moved between cash and a Merrill Lynch FTSE100 tracker.
Jacqueline Dow, onshore bonds marketing manager in Edinburgh, said Merrill Lynch and Scottish Equitable plan to add an options overlay to the FTSE100 tracker. This would likely involve either entering swaps, or selling equity futures, said Dow, but the final details of the product have not yet been confirmed.
Merrill runs several of Scottish Equitable's passive funds, according to Dow, and this is why it was chosen as the counterparty on the CPPI fund. Barclays Capital, however, provides the gap-risk guarantee and was chosen because it offered the best terms, coupled with a name investors will recognize.