Abbey subsidiary backs commercial property fund

Abbey Financial Markets (AFM), a subsidiary of UK bank Abbey, has provided the seed capital for the new FTSEpx fund recently launched by UK-based asset manager MSS Capital. This fund was launched with the FTSE UK Commercial Property Index Series on June 26. And AFM is already working on a range of structured investments for both retail and institutional investors based on these indexes.

AFM has invested in the FTSEpx fund since the commercial property sector began attracting retail investment into funds. London-based Richard Williams, head of derivatives and structured products at AFM, says the group is looking at ways to develop products that will appeal to the retail market.

MSS Capital says four other investment banks have also agreed terms for a FTSE licence - these allow use of the index to create property derivatives, including swaps and options.

According to FTSE, the indexes are calculated by obtaining performance data from the FTSEpx fund, which provides exposure in segregated sub-funds in retail, office and industrial property. Each sector has an index to track its performance.

The fund is a property unit trust, domiciled and regulated in Guernsey. Abbey has linked the residential property bond to the Halifax House Price Index, making it a core offering for the IFA market. "It is too early to say how the IFAs will react to the new indexes, which cover commercial rather than residential property," Williams says. "In terms of structures, there certainly will be a capital guarantee flavour."

Meanwhile, Abbey has also launched a range of capital-guaranteed structured deposit accounts with a minimum investment of £3,000. The products offer different rates of return, depending on the link to the underlying investment and the term of investment.

The Abbey Capital Guaranteed Income and Growth Bond, for example, is a fifty-fifty investment. It returns 7% gross interest on 50% of the total investment after one year. The remaining 50% is invested for six years, with 100% participation in any growth in the FTSE 100 Index capped at a maximum of 60% interest.

And the Abbey Capital Guaranteed UK Equity Bond is a five-year investment offering 130% participation in any growth in the FTSE 100.