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Barclays targets bond investors

Barclays has brought out two structured products aimed at people with offshore life bonds.

The guaranteed equity FTSE 100 deposit account aims for growth linked to the performance of the FTSE 100 index over five years, The guaranteed annual income equity deposit account provides income over five years and is linked to the performance of three indices – the FTSE 100, S&P 500 and Dow Jones Eurostoxx 50 index. Both products have a minimum investment level of £10,000 or the currency equivalent.

The growth product is the simpler of the two as investors will receive 85-125 per cent of the growth in the index at the end of the term, depending on the currency denomination they have chosen. The original capital is also returned in full at the end of the term, regardless of the performance of the index.
The income fund is inevitably more complicated as pricing within the structured product makes it impossible to produce income plus a full capital return regardless of index performance.

As a result, either the capital return or the income has to be dependent on stockmarket performance. In this case, although the capital is fully protected, the income is conditional on index performance. Barclays has softened the blow by making some of the income guaranteed, while the remainder is dependent on stockmarket performance.

For sterling and dollar investments, 2 per cent income a year is guaranteed, while a 4.75 per cent bonus will be paid if all indices are above their starting values. For euro investments, 0.5 per cent income a year is guaranteed while a 5.5 per cent bonus depends on all three indices ending the term above their starting values.

These products could be of interest to investors who hold offshore life bonds for IHT planning. However, the growth product in particular will face competition from other structured products, while the income fund carries the risk of generating only the guaranteed part of the income return.

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