Type: Guaranteed equity bond
Aim: Growth linked to the performance of the FTSE 100 index
Minimum-maximum investment; £4,000-£2m, Isa £7,000, £7,200 for 2008/09
Term: Six years
Return: 125% of the growth in the index provided index does not rise by more than 100 per cent or 125% of the fall in the index provided index does not fall by more than 50%
Guarantee: Original capital returned in full regardless of the performance of the index
Closing date: March 20, 2008, March 14, 2008 for Pep/Isa transfers
Commission: Initial 3%
Tel 0845 890 8915
Arc Capital & income has introduced the bull & bear enhanced investment plan, a guaranteed equity bond that provides growth if the FTSE 100 index rises or falls.
Baronworth Investment Services director Colin Jackson says: “This product offers the client a potential return irrespective of whether the FTSE 100 index, to which it is linked, rises or falls. This is something that is quite unusual, although Arc Capital & Income previously offered something similar.”
According to Jackson, in what is now a volatile market, this product would meet the needs of a number of investors who are looking for a return in the knowledge that their capital is protected at maturity. “ The participation is 1.25 times the rise in the index, unless the index rises by more than 100 per cent at any time after the plan has started, or 1.25 times the fall in the index, except if it falls by more than 50 per cent at any time after the plan has started.”
Jackson observes that subject to the soft protection not being breached, the investor will get a decent return on his or her investment plus capital protection at maturity. “The literature is attractive, well written and easy to understand, while the adviser remuneration is in line with the market – although renewal commission would be a bonus,” says Jackson.
He says that Baronworth is pleased to see that any returns are subject to capital gains tax as opposed to income tax. “This means, that, subject to the availability of all or part of their CGT allowance, returns on the investment would be free of tax. This would also leave investors free to utilise their Isa allowance elsewhere,” he says.
Jackson struggles to find anything to dislike about the plan. “The product does what it says on the tin,” he says. He cannot find any similar products that will provide direct competition.
Summing up, Jackson concludes: “When Arc Capital & Income brought out its first version of the bull & bear product, I thought it was innovative. My view has not changed.”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Good