FVC custom indexes

The products followed by the Future Value Consultants indexes represent three payouts common to structured products

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Accelerated indexes perform best

The month-on-month change in all US indexes to the end of September was positive. Figure 1 shows the performance of the three indexes alongside the performance of the benchmark index for the region, the S&P 500 index, which gives an indication of how the overall market has performed over the period.

The products followed by the Future Value Consultants (FVC) indexes represent three different payouts common to structured products. Two of the product types are capital at risk - one income and one growth - and the third is a principal-protected growth product.

The principal-protected index follows products designed to return 100% of capital if held until maturity. Though the index itself can fall below 100 as market parameters affect the net asset values of the products, the products themselves will pay at least 100% at maturity. This index is the lowest risk of the three indexes and has the lowest volatility, but has recorded the lowest growth of the three US FVC indexes over the past two months.

The accelerated growth and income indexes have made huge gains in the past year, of 29.56% and 17.01%, respectively. Both have been on the rise for the past four months, in line with growth in the US market. The income index has remained consistently above the accelerated index due to its fixed coupon stream. However, the month-on-month percentage growth has been lower, as the products are not as affected by market growth as are those in the accelerated index.

The products included in the income index will pay a fixed coupon plus capital as long as the barrier is not breached, so growth in the market only makes breaching the barrier more unlikely, rather than increasing potential returns.

All three UK indexes also rose over the past month (figure 2). Over the past four months, the biggest increase can be seen in the UK accelerated index, which rose 10.97% between the end of May and the end of September. The year-on-year growth for this index was also the greatest, at 17.95%. Of the three indexes, the UK income is the best overall performer.

The global indexes (figure 3) represent the performance of a weighted average of the FVC indexes in the two regions already discussed plus Europe and Japan. Over the past month, the best-performing index of the 12 was the US accelerated index, which rose by 3.27%. The worst performer was the Japan protected index, which rose by only 0.1%. The performance of the global indexes is similar to that of the US and UK. All have risen month-on-month over the past four months. As is the case across all four regions, the protected index has the lowest month-on-month growth across all three indexes.


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