Britannia Building Society is to hedge a three-year FTSE participation note. Dubbed the Guaranteed Capital Bond, it pays investors 85% participation in FTSE 100 growth over three years, with a maximum return capped at 140%.
A treasury official at the U.K. thrift in Leek, Staffordshire, said, "We look to secure the details of the return prior to the product starting." The note launches June 28 and the thrift will monitor sales of the product to determine the size of the hedge. The official noted, however, the treasury does not take any equity exposure and would look to hedge the full issue rather than hedge dynamically.
The official declined to name potential counterparties, but noted Britannia has International Swaps and Derivatives Association agreements in place with a handful of counterparties, and will compare the prices on offer. "We always look to ensure that we get the best price," she added. More counterparties can be added to Britannia's list of potentials, depending on clearance by a treasury risk committee.
