Barclays Bank Delaware Certificates of Deposit Linked to the Performance of the Q-GSP Large Cap US Risk Controlled 5% USD ER Index due February 28, 2019

The sellers of structured CDs categorize them as “fixed income” although they are dependent on the performance of underlying equities or baskets of equities, raising questions (to begin with) about their suitability for retired investors and the role of structured CDs in any portfolio that is properly asset-allocated. FDIC protection of the principal is a selling point. On the downside, these instruments tie up the investor’s principal for a number of years, the coupon yields are often unpredictable beforehand, and the calculations are often obscure and complex, with tricky caps and limits.

With these Barclays products, the investor is guaranteed a return of 100% of the principal, but only after holding them to maturity. Here that period is seven years. There are annual coupons, but investors cannot know what their interest rate is going to be until they get their coupon payment. These investments are sold with promises of higher potential returns, but the annual coupon payment can be as low as 0.3%. The interest rate is linked to the price of certain stocks. The coupon calculations are set so that if the underlying equities do well, investors still only get up to the maximum coupon cap.