Blue Sky Asset Management has launched a second tranche of its Protected Income Plan, a structured product response to the current market conditions for financial stocks. The PIP II offers an income of 10 per cent per annum for a six-year term backed up by 100 per cent contingent capital protection at maturity: investors can also opt for 2.45 per cent quarterly income or 68 per cent “roll-up”.

BSAM says it is launching the second tranche following the high level of demand experienced for PIP I and because it thinks financial markets still present a window of opportunity. Despite improvements to the outlook for the sector - and the five major UK banks to which the Plan links – following annual results, BSAM believes certain institutions may have been oversold following the indiscriminate sell-off in the financial sector over preceding months.

The portfolio is made up of HSBC Holdings, Royal Bank of Scotland Group, Barclays Group, HBOS and Lloyds TSB; all rank within the 20 biggest companies in the FTSE 100, collectively representing in excess of £200 billion (just under $400 billion) market capitalisation.

Chief executive at BSAM, Chris Taylor, said: “Volatility in the sector has not been unwarranted, but it has been based upon fear and uncertainty. The year end reporting season, however, is bringing substantive and detailed information to the market, directly from the institutions most affected, and these trading statements certainly highlight better news than had been priced in, and that discrimination within the sector is possible. Earnings and dividends have generally proved robust and resilient.”

The plan delivers the income payments with 100 per cent contingent capital protection at maturity, with a 65 per cent "downside portfolio barrier level"; if this level is breached at any point, capital is not protected at maturity and any potential capital loss will be 1 per cent for 1 per cent, in line with the value of the lowest stock in the portfolio. The barrier level is only triggered by closing prices and the plan also includes three months averaging which spreads the measurement of the final value of the stocks over this period.