Citi tailors product to volatility outlook
Financial services group Citi has launched a new investment product with leveraged index exposure that is designed to help smooth volatility from the equity market over the next five years.
The MLI Quarterly Lock-In (Series 2007 — 2009), which offers 100 per cent capital protection if held to maturity, is linked to the performance of the S&P/ASX 200 index.
Performance is calculated by taking quarterly observations of the index over the five-year term and averaging them at maturity (with no negative observations used in calculating average performance).
Once the average index performance has been determined, it is then multiplied by a participation rate of between 180 and 200 per cent to generate the final leveraged return of the investor.
Citi’s head of equity structured products Irfan Khan said the averaging feature of the MLI Quarterly Lock-In (Series 2007 — 2009) helps smooth volatility when compared with a direct investment in the Australian equity market.
“Recent shifts in the Australian equity market suggest that future market movements may not be as smooth as we have seen in the last few years,” he said.
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