BoE Life International, part of the South African investment bank, has introduced its international with-profits bond aimed at UK investors who want to invest offshore.
The bond invests in BoE's fourth series with-profits fund and currently offers an annual bonus of 5.5 per cent. In turn, the with-profits fund invests in a mixture of equities, bonds and hedge funds of funds.
There are two versions of the bond, a capital redemption version and a life assurance version. The difference between the two versions comes into play if the investor dies. Under the life assurance version, the death benefit is 101 per cent of the encashment value. The capital redemption version allows ownership of the bond to pass to someone else and has a fixed term of 99 years. Both versions of the bond allow withdrawals to be taken on a quarterly, half-yearly or yearly basis, but at least £5,000 must remain invested.
The underlying fund's exposure to hedge fund of funds may make the product more appealing to high-net-worth clients and institutional investors who are looking for a smoothed investment. A bond that invests in hedge funds may seem attractive to investors who have seen some with-profits providers slash their bonuses in line with falling stockmarkets.
However, there is no guarantee that BoE's mixture of underlying assets will produce the expected returns for future years and investors should be aware that bonus rates may fluctuate accordingly.