Morgan Stanley unveils cash collateralised and gilt-backed product

Morgan Stanley has launched a three-year structured product for retail clients which is both cash collateralised and backed by triple A-rated UK gilts to mitigate counterparty risk. The issuer has developed the plan in response to feedback from UK financial advisors relating to concerns over credit risk. A recent survey of advisors by Morgan Stanley showed that 30% believe issuer credit rating to be the most important factor to consider when recommending a structured product, beaten only by capital protection which was prioritised by 32% of those surveyed.

The Morgan Stanley FTSE Defensive Gilt-Backed Growth Plan delivers a return of 9% per year and terminates early provided the FTSE 100 index does not fall more than 10% on each annual anniversary of the plan, for a maximum of three years. Capital is repaid in full as long as the final index level is not 50% or more below its initial level at maturity. If this occurs, capital is lost 1:1.

The plan seeks to reduce the product's credit risk in two ways. The bonds used to protect capital are UK