German bank HypoVereinsbank (HVB) is the latest issuer to launch a product with a well-known certificate structure within a fund wrapper.
The bank says it intends to offer customers who traditionally buy funds a product which provides the advantages of certificate structures, for example the chance to gain profits from not only rising but also faltering and slightly decreasing markets.
HVB Bonus Fonds DJ Eurostoxx 50 11/2013 is a six year fund linked to the performance of the DJ Eurostoxx50 with a classical bonus certificate structure. The product offers the greater of a 140% capital return or a 100% participation in the final index level provided the index never falls to or below a barrier of 50% its initial level. Otherwise the investor participates 1:1 in the performance of the underlying at maturity.
Another reason the bank gave for the launch is that funds bought before the end of 2008 will not be affected by a withholding tax of 25% on gains which comes into force from 1 January 2009.
Certificates, however, will be disadvantaged for the next couple of years. This is due to a transition period rule that states investors have until summer 2009 to profit from certificates bought before 1 January 2009 under the currently favourable rules.
The minimum size of this fund is €15m; however, the bank told SRP there is an enormous demand for the product.
HVB will issue more products like this in the future. Two more funds with bonus structures are due before the end of 2007, with new structures following next year.
This product is available now in Recent Additions (Germany and France).
