Chase Manhattan Offers Stock Market-Linked CD For Institutional Investors
NEW YORK (AP) _ Chase Manhattan Bank, which has been offering consumer certificates of deposit with returns linked to the performance of the stock market, on Tuesday unveiled a similar product for institutional investors.
The so-called Guaranteed Market Investment Account - available in minimum denominations of $1 million - is a CD with an interest rate based on the percentage increase of Standard & Poor’s composite index of 500 stocks during the life of the certificate.
Interest on the certificates, which are available in maturities of 6 months to 3 years, can total up to 115 percent of any percentage increase in the S&P 500 during the term of the account. The return varies depending on the maturity of the CD and the guaranteed interest rate chosen by the depositor.
Depositors also may select guaranteed minimum interest payments of up to 15 percent simple interest. The higher the guaranteed interest rate, the lower the percentage of any index increase a depositor receives.
If the index declines over the term of the CD, the depositor gets the agreed-upon minimum rate, which is never less than zero percent.
Chase had portrayed its ″Market Index Investment″ for consumers as an attempt to loosen federal restrictions prohibiting banks from engaging in securities activities.
The Investment Company Institute, a mutual funds trade group, in April sued to block further sales of the certificates on the grounds that the product violated the Glass-Steagall Act, the federal law which seeks to keep separate the activities of banks and investment firms. The suit is pending.
Minimum returns on the Market Index Investment ranged from zero percent to 4 percent, with returns of up to 75 percent of the change in the S&P 500.
Ken Mills, a spokesman for Chase, said consumer response to the market- linked CDs had been ″very, very good,″ although the bank would not quantify demand for the product.
In a news release, Chase Treasurer J. Richard Zecher said the bank was aiming the Guaranteed Market Investment Account at pension funds, insurance companies and other institutional investors seeking to hedge returns on their portolios.