U.K. thrift Skipton Building Society has bought a knock-out call on the FTSE 100 to structure a retail investment product. Ashley Lilley, money market manager at Skipton in North Yorkshire, said it chose the structure because it is capital protected and has an early redemption feature. "We think this will tempt a lot of people back to the stock market," Lilley added.
In the structure, if FTSE 100 growth is above a set barrier at the end of any of the first four years, the note will mature early and return capital plus an increasing level of participation in the index. If the index comes in below the barrier the investment product continues to its six-year term and investors receive 100% participation in the growth of the index plus their initial capital. The kickout bond closes on March 17.
The thrift is marketing the instrument, which it calls the FTSE Kickout Bond, through its branches and independent financial advisors. Abbey National Treasury Services is the counterparty to the option.
