Bespoke Financial Consulting, a London-based structured product design group, has launched a fund based on an equity derivative swap. The Bespoke fund is designed to return investors' initial investment plus 90% of the upside of the FTSE 100.
The pay out is achieved through an over-the-counter derivative with CDC IXIS, which receiving the performance of assets held by the fund in exchange for 90% of the upside of the FTSE 100.
Bespoke pitched the trade to several banks, but chose CDC IXIS for its AAA credit rating and long-term relationship which is in keeping with the fund's policy to minimize investor risk.
Robert Addison, a partner at Bespoke in London, said the combination of 100% credit protection and regulatory compliance make the fund particularly attractive to retail investors.
The launch of the fund has created the first open-ended investment company to distribute structured products using a European directive that allows funds approved in one E.U. jurisdiction to be sold in another.
These regulations are known as Undertaking for Collective Investments in Transferable Securities III, or UCITS III.
Whilst groups such as AXA and Standard Life have talked about introducing UCITS III compliant structured retail products, officials at the Financial Services Authority, the U.K. regulator, said that Bespoke was the first to launch such a fund.
