US wrap: S&P sectors provide potential accelerated returns
The latest offering for the US market includes three products based on a variation on the Standard & Poor's Depository Receipts (SPDR), which was the first US-listed exchange-traded fund (ETF). They provide the basis for accelerated growth products issued by Barclays and follow a market trend towards issuing products based on ETFs.
The first of these products is the SuperTrack Notes linked to SPDR S&P 500 ETF Trust. This product has a one-year maturity with a 200% market participation, capped at 13.5-17.25%. Principal is not protected at maturity and any fall in the value of the fund will result in capital being lost at the rate of 1:1.
There are two other products issued by Barclays that are based on the SPDR but they track sections of the S&P 500, broken down by sector. The products track the Financial Select Sector SPDR Fund and the Energy Select Sector SPDR Fund, both sectors are frequently used to underlie products in the US market. The Barclays products provide 200% participation in the sector funds and no principal protection.
Both funds were down at the close of the market on Friday, but this follows a general fall in the market. However, the Energy Select Sector SPDR Fund performed worse than the other select sector funds, dropping 1.14 points.
UBS has issued an accelerated growth product based on the MSCI Emerging Markets Index Fund, which is one of a couple of products that track the fund in the latest issuance. The Return Optimization Securities Linked to the iShares MSCI Emerging Markets Index Fund are a two-year investment, offering 500% market participation, a very high participation rate compared with most accelerated growth products in the US market, which usually have a 200–300% participation rate. The return is capped at 35–42% and the principal investment is not protected at maturity.
Source: FVC and SEC filings
For access to analysis of the US structured products market: www.structurededge.com
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