A GEB is a type of structured product that offers investors returns linked to the FTSE100 index, with a guarantee of a full return of their initial investment if the FTSE falls over the five-year term.
The IMA released a statement saying: "Looking at the 10 GEB issues that have matured to date, an investor would have gained an average of £1,933 in each of the nine years the tracker fund outperformed, and would have lost only £449 the one year the tracker fund underperformed the GEB."
Both basic and higher rate taxpayers would have fared better with a tracker fund: a basic rate taxpayer would have received on average £1,695 more in returns than an investor in a GEB, while a higher rate taxpayer would have been on average £1,827 better off.
The study also found that the cost of dividends lost exceeded the cost of investing in a tracker fund.
The IMA statement continued: "Whereas investors in tracker funds benefit from the dividends paid out by FTSE100 companies, which are re-invested net of tax, GEB investors receive no dividends."
"Investors in GEBs have lost out on an average of £2,360 in dividends over the 10 GEBs that have matured to date. The cost of these lost dividends exceeds the net cost of investing in a tracker fund by between £1,332 and £1,900, based upon an investment of £10,000."
The research also looked at what a tracker fund investment might have returned over each of the past 107 years.
In 92 of the last 107 years, a five-year tracker investment would have delivered an average gain of £6,566 on the investor’s original capital.
In 15 of the last 107 years, a tracker fund investor would have made an average loss of £1,217.
Performance of GEB and tracker vehicles
| Maturity date |
GEB return (£) |
Tracker funds return (£) |
Difference (£) |
|
| GEB 1 |
18/04/2007 |
11,559 | 13,822 | 2,263 |
| GEB 2 |
29/08/2007 | 14,431 | 16,271 | 1,840 |
| GEB 3 |
29/11/2007 | 14,579 | 16,979 | 2,400 |
| GEB 4 |
09/04/2008 | 14,774 | 17,396 | 2,622 |
| GEB 5 |
17/06/2008 | 13,529 | 15,787 | 2,258 |
| GEB 6 |
25/11/2008 |
11,286 | 10,837 | -449 |
| GEB 7 |
19/05/2009 | 10,000 | 11,478 | 1,478 |
| GEB 8 |
28/07/2009 | 11,200 | 12,022 | 822 |
| GEB 9 |
10/11/2009 | 10,000 | 12,645 | 2,645 |
| GEB 10 |
20/07/2010 | 10,207 | 11,275 | 1,068 |
Source: IMA