Launch of US equity recovery products continues despite falls

Distributors are continuing to market structured products that bank on a recovery in equity markets in the face of continued declines, with Barclays Bank issuing a three-year product on the back of optimism following Barack Obama's inauguration.

Barclays' growth product is designed to capitalise on a rapid recovery in US markets and aims to provide a return of double any rise in the S&P 500 index, limited to a maximum of 50% on the nominal value. The final index level is averaged daily over the final month of the term and must therefore rise by 25% from the initial index level for the maximum return to be paid.

"While this averaging can reduce the potential for gain, it can also lessen the effects of falls in value," according to the product's term sheet. Should the index fall below 60% of its initial level, and the final level be below the initial level at maturity, capital is lost on a 1:1 basis.

JP Morgan has also launched a product offering three times leveraged exposure to the S&P 500 index with no capital protection. Returns are capped at 33%.