Dexia Bank has purchased single-stock digital options and a zero-coupon bond to structure a capital protected eight-year maturity instrument. Bart Van Der Veken, investment strategist in Brussels, said the product gives investors exposure to 15 single stocks.
The product pays a guaranteed coupon of 5.5% for the first two years. The coupon is guaranteed by a proportion of the investors' capital remaining in cash after the purchase of the zero-coupon bond and the options. The performance of the options dictates the payoff in the final six years of the product. The annual coupon then varies between 0% and 11%, depending on how many of the options pay out, explained Regina Spierings, head of product engineering at Dexia.
"Retail clients in the Benelux region are mostly interested in capital guaranteed products," noted Van Der Veken. Coupon products are more appealing than growth products he added, because confidence in equity investments remains shaky amongst retail investors.