Premier Asset Management, a U.K. fund manager and savings product provider, has bought knock-out call options on the FTSE100 and Dow Jones Euro STOXX 50 for its latest capital-protected investment product. The transaction represents the first time Premier, with GBP605 million (USD1.06 billion) under management, has bought an option on the Euro STOXX.
The six-year deal has an early redemption feature: if on any anniversary the indices are at or above their starting level the product knocks out, paying investors 8% for each year they were invested. Simon Weldon, managing director in sales and marketing at Premier in Guildford, said it ventured into the Euro STOXX option to offer investors a higher return. The index is a novelty to U.K. investors, as most U.K. products are written on the FTSE100. Weldon noted the deal has so far had a mixed response, with more sophisticated clients happy to invest in the deal but less confident investors holding back. The product closes July 29.
Weldon declined to name Premier's options counterparty. The fund manager chooses derivative counterparties for their rating, he said, because it is important for retail investors to trust the product and they are more likely to invest in structures backed by highly-rated firms.
