Trackers looking good

trackers

"I fully understand why people are buying them,but many of those providing advice (& purporting to add value ?!) must know that the sacrifice of the Div. portion of the upside is poor value for the comfort of a Guarantee."

Well, I agree with that. My point is simply that the investor shouldn't assume that in any given bond the link is to the capital-only index. He should check.

(I strongly suspect that in most bonds the link is to the capital-only index. But I may be wrong, and if you are tempted to buy a tracker bond you should certainly investigate the point before making a decision.)
 
capital only

In terms of the products being sold to the individual investor,I have yet to see a 'tracker' which provided participation in the Dividend.Apart from anything else,this is a function of the fact that the options market relates to indices in capital terms.

Apologies for the typo in my earlier post-the site on which the paper is available is www.barclaysglobal.com.
 
guarantee

By way of clarification,if the Fund carries a guarantee,it is virtually certain to be underpinned by options- i.e.linked to one or more indices in Capital terms(i.e. no Div.).

I have not come across an Index tracking fund(which does participate in Div.) offerring a Guarantee.
 
Early FNBS & EBS Tracker performance.

Back in the early to mid 90's both the First active and the EBS Building Societyeach issued about 13 trackers. Most of these were linked to the Nikkei. Has anyone got an update as to their eventual performance. Its just that we never hear about the duds!
 
Nikkei

Nikkei trackers issued around 5 years ago will be very close to 'even steven',so there will be no bonanza for investors.

As well as those specifically linked to the Nikkei,this index forms part of the potential return on a high proportion of trackers.

This had a lot more to do with the fact that options on the Nikkei were relatively cheap than any belief about future returns & in its own way was scandalous.Shane Ross is the only commentator whom I can recall highlighting this in the media.
 
Scandal

Amellion, and the reason Options on Nikkei were cheap is that the currency was hedged. The fact is that the Japanese stockmarket has performed quite well but because it is denominated in a currency which continues to strengthen the index itself has been made to look flat. Ironically, the brochures would actually made a virtue that there was no currency "risk" but it was the very removal of this risk which made the options cheap.:rolleyes
 
Nikkei options

Nicky - I think you may be mistaken in terms of the currency angle.The main reason these options were cheaper was that the implied volatility of the Nikkei was lower.If there was any hedging involved,it would have improved the return as selling forward a currency with a lower interest rate would generate a premium.
 
Currency Hedging

Hi Amy, u like me, nuffin' better to do on a NYE?

As you say, selling a low yielding currency forward generates a premium or increases the margin to the provider. Trust me, an unhedged option on Nikkei was more expensive than on other more "stable" indices, like Footsie.:rupert
 
Building society trackers that were duds.

So, are you saying that the building societies chose the Nikkei so that they could make more money for themselves or what? The building societies designed these trackers inhouse, would they have known what they were doing?
 
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