Morgan Stanley product offers decelerated downside

Morgan Stanley has unveiled a new form of downside protection in its latest UK structured product release. The investment, which tracks the FTSE 100, features decelerated participation on the downside of the index.

The six-year FTSE Tracker Plus Plan offers investors 1.2 times any growth in the index with a cap of 84%. Capital is at risk, but if the FTSE falls, investors' capital loss is reduced to just a fifth of the fall in the index, so for every five point fall investors are down 1. If the FTSE 100 falls to zero, investors will only lose 20% of their original investment.

The plan is being marketed to UK independent financial advisers (IFAs). "The feedback we are getting from IFAs is very positive – in particular, the deceleration feature is very simple to explain to clients," says Sophie Barnett, vice-president at Morgan Stanley.

"Capital protection is obviously very important to IFAs and their clients, but that has become very expensive over the last year. What a lot of providers – ourselves included – have been looking at is offering soft protection on the downside. We wanted to offer an alternative to that by introducing the deceleration feature."

The product is aimed at investors who expect growth but are still cautious about putting their capital at risk. Barnett says, "We wanted to fill a gap in the market for investors who do expect growth and are willing to put a portion of their capital at risk. We are always looking at new payout ideas and this product is innovative but very simple to understand."