Goldman Sachs Group Inc. plans to issue four certificates of deposit linked to stocks as record low interest rates drive investor demand for the potentially higher-yielding CDs.

The structured CDs are the bank's first and are set to price at the end of the month, said a person with knowledge of the offerings who declined to be identified because terms aren't set. One four-year CD is linked to changes in the Dow Jones Industrial Average, with annual returns at a minimum of about 0.5 percent and a possible maximum of 24 percent, according to a preliminary sales document. That compares with the average yield of 1.15 percent for a three-year, fixed-rate deposit, data show.

Demand for CDs tied to assets such as equities, commodities and exchange-traded funds has soared as the Federal Reserve has held its benchmark rate at zero to 0.25 percent since 2008. Bank revenue from the investments has more than tripled to $99 per million dollars in retail deposits in October from $30 in January, according to Kehrer-LIMRA Research compiled from approximately 30 lenders, including Wells Fargo & Co. and SunTrust Banks Inc.

The market-linked or structured CD market has had "healthy growth," said Glenn Lotenberg, a managing director at Incapital LLC in Boca Raton, Florida, which expects to sell $2.5 billion of structured CDs this year, from $2 billion in 2010.

Data on the market is incomplete as the investments aren't registered by the Securities and Exchange Commission and the Federal Deposit Insurance Corp. doesn't track market-linked deposits separately.

Michael DuVally, a spokesman for New York-based Goldman Sachs, declined to comment.

Banks Benefit

Banks benefit from issuing structured CDs, which the FDIC insures up to $250,000, by raising deposits at lower funding levels and collecting commissions, said Tim Bonacci of CD Funding Securities LLC, who's helped about 30 financial institutions set up their own proprietary CD business since 2005. The average fee on a five-year deposit is about 3 percent, Bonacci said in an interview last month.

Goldman Sachs, which was the most profitable securities firm in Wall Street history before it converted to a bank in 2008 after the collapse of smaller rival Lehman Brothers Holdings Inc., had $41.8 billion in deposits in the third quarter. That's up from $38.6 billion at the end of 2010.

The four-year CD tracks the monthly percentage change in the Dow, with gains capped at 1.5 percent to 2 percent and no floor on the declines. That means if the Dow advanced 5 percent, the monthly return would be recorded as no more than 2 percent, while a drop of the same amount would be taken in full.

Banks create market-linked CDs by combining zero-coupon bonds with derivatives to offer customized bets to investors. Derivatives are contracts whose value is derived from stocks, bonds, currencies and commodities.

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