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Bond investors need&#39a market miracle &#39

Investors are set to lose hea-vily on stockmarket-linked bonds unless there is a “miraculous” recovery in the markets, according to research from IFA Chartwell.

The firm is predicting that bonds will be the investment scandal of 2003, with some investors in danger of losing all their money. Investors in Canada Life&#39s Nasdaq-linked high-income bond 3, for example, need the index to rise by 154 per cent by April next year to see their full capital returned.

Others need stockmarket rises of between 30 and 67 per cent to repay their original investment.

Eurolife&#39s income and growth plan 2 bond is on course for a 67 per cent loss. NDF&#39s three income and growth plans need the Eurostoxx 50 to rise by at least 60 per cent in the next year for investors to suffer no loss on capital.

Providers have hit back at the survey, saying it takes no account of the high income levels that investors have received.

Chartwell is submitting its findings to the FSA, which is investigating high-income bonds.

Canada Life executive director (strategic development) Stephen Tsu says: “It is unfortunate that the bond is linked to the Nasdaq which has done unprecedented things. Investors have at least enjoyed very high income levels.”

Chartwell associate director Patrick Connolly says: “Some people are set to lose a lot of money unless there is a miraculous recovery in the stockmarket.”

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