The investment bank Merrill Lynch Europe has introduced an index and investment product with a unique approach to tracking performance and capitalising on European long-term growth cycles.
For a minimum of #100 (£78.75), investors will be able to purchase certificates linked to the new Europe Style-Switching Index. The index comprises 36 stocks from six European countries, each country with the same weighting. It will be revised every three months using the bank's new indicator strategy to select companies on the basis of each country's economic cycle.
As the economy of a particular country accelerates, the investment switches to value stocks and as it decelerates the investment switches to growth stocks. Merrill Lynch Europe has developed this forecasting strategy since 1993 and it is now turning it into a product open to investors for the first time.
The Europe Style-Switching Index combines active and passive management and aims to outperform the Dow Jones STOXX benchmark.
Unlike a bond, a certificate does not have principled protection, which means there is no guarantee you will get back what you put in. The risk profile of this product is like stocks or a fund.
With this certificate the investor is buying a basket of 36 shares along with Merrill Lynch's strategy. Investors can get in and out of the index instantly and can track performance through the usual financial information channels.
The charges structure is interesting - instead of paying a management fee, the investor gives up the dividends on the stocks. There is also a 1 per cent fee up front when an investor purchases a certificate.
This is the seventh product offering into the Irish market from Merrill Lynch in 18 months. The last one, the Supertech Fund, was launched here in February and generated #40 million of Irish business for the bank.
