Glossary Q to S
Q
Qualifying investment
– for an investment to be included within a PEP or ISA, it must be listed on a stock exchange and meet certain qualifying rules set down by the Inland Revenue. Because structured product-based closed-ended investment companies are listed on a stock exchange (usually Dublin), most structured investment products qualify to be included in ISAs and PEPs.Quanto option
- A quanto option is denominated in a currency other than the natural currency of the underlying. The payout of a quanto option does not depend upon the movement of the exchange rate between the two currencies. For example, an option on the FTSE100 that is denominated in US Dollars is a quanto option if the return is simply based on the movement of the index and not the movement of the index and the movement of the GBP/USD exchange rate.R
Rainbow
- A return based on the performance of a basket whose best performing assets are weighted more heavily than those which perform less well. Baskets may be types of assets which provide diversification as well as a historical look at the best performing without having to make the choice upfront.Rate of return
– this is the income or growth part of the product. It is set at the start of the product’s life. Generally speaking, the higher the rate of return, the more risky the product.Reduced capital return
– this happens if an index falls from its opening level through the safety margin and fails to recover to either the opening or hard-protection level. Depending on the level of gearing, you will receive only part of your original investment back when the product becomes due for payment.Secondary market risk
– this can happen after a closed-ended investment company is listed on the stock exchange. It refers to the risk that nobody will buy and sell shares in this company. While a secondary market is organised by providers at the beginning of a product’s life there can be no guarantee that there will always be willing buyers and sellers. So, if this situation arises it would make it extremely difficult for you to cash in the plan before the end of the investment period.Secondary measurement period
– this is the period during which the final value of the index is assessed. It may or may not be triggered depending on whether the soft protection levels have been broken during the initial measurement period. If a level has been broken, the secondary measurement period (also known as the look-back period) is the period over which the final level would be worked out.Soft protection
– this refers to the level to which the basket of shares or index can fall before your original investment is at risk. This is often referred to as the safety margin. Typical levels for structured investment products vary but can be between 20% and 50%.Standard & Poors (S&P 500)
– this is similar to the FTSE 100 index, but this time it is made up of the largest 500 companies in the US.Structured investment product
– this is a fixed-term investment that offers known returns as either income or growth. These products are structured because the returns are clearly set from the beginning so you will know the best- and worst-case situations.These products pay a fixed amount of income (at regular intervals) or growth on your investment when it becomes due for payment. However, there is a risk of losing some of the original amount invested, if the index or basket of shares to which the plan is linked falls beneath a certain safety level and does not make a sufficient recovery.
Structured investment products used to be issued as life-assurance bonds, but have been replaced with closed-ended investment companies, typically based offshore (usually in Dublin), or as bonds.
Super Tracker
- A super tracker is a type of structured investment that provides a degree of capital protection together with participation in any rise in the underlying index. There are many variations but typically the product might offer a return equal to 200% of any rise in an underlying and full capital protection unless the underlying falls by more than a fixed percentage during the investment term and fails to recover by maturity.