Duggan Asset Management, a Dublin-based niche investment firm, has launched a 100% capital protected deposit-based structured product - called the Credit Bond. The product is designed to give investors exposure to the high-yield credit market by investing in the Markit LongX Europe Crossover EUR Isovol Index Excess Return (a long position in credit which is the equivalent of selling protection on the iTraxx Crossover Index). The product also has the potential to benefit from stock market performance as the participation rate at maturity will rise (from a minimum level of 100%) in line with the Dow Jones Eurostoxx 50 Index. The three-and-a-half year trade will pay back 100% of the capital plus a minimum participation of 100% in the credit index. Also, returns can be boosted by the performance of the DJ Eurostoxx 50 Index, eg. if the index has risen by 60% at maturity, the investor will get 160% but if the equity index falls by 20% they will still get 100% participation in the credit index with 100% capital protection. Returns are in euros and the issuer and guarantor of the bond is Ulster Bank Ireland. The investment is 100% capital protected by Ulster Bank Ireland, the issuer of the bond. Any return that tracks the performance of the underlying index is not certain, with interest provided from the payout of a financial derivative purchased by Ulster Bank from BNP Paribas. In the event of BNP being unable to fulfil its obligations to Ulster Bank, your returns may be limited to the return your capital, states the documentation. The minimum investment is €25,000. The closing level of the bond will be based on the average monthly value of the underlying investment strategy over the final six months. The closing level of the bond will be based on the average monthly value of the underlying investment strategy over the final six months of the term (seven observations) . The closing date for applications is June 19 2009. The commission is 5.49%, of which intermediaries, ie. IFAs, take 3.5%. This product is thematic, and is designed to allow investors to benefit from the carry on credit and from the potential that credit spreads will narrow, says Mark Tully, investment analyst at Duggan Asset Management. Spreads are historically high and if we experience general economic recovery, it is likely they will narrow over the next few years and revert to levels more consistent with long-term averages. Additionally, investors can bet that in three years time stocks will also recover following a credit led recovery and boost their return, he added. Related stories: CDS: Spreads widen on equities sell-off CIMB launches China recovery structured fund...
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