Britannia International has introduced the international blue chip five-year bond, a guaranteed offshore bond that is linked to the performance of 12 blue-chip companies from the UK, Europe and the US.
The bond offers a tiered return of up to 65 per cent gross at the end of the term and the amount investors get depends on how many stocks have remained at their starting level, or increased in value, by the time they are measured at end of the term. Whatever happens to the stocks, which include Coca-Cola, Nestle, Shell and Vodafone, investors are guaranteed the return of their original capital.
To get a return above the original capital, at least three stocks must rise or stay at the starting level. In this case, investors will get just 4 per cent. Where four or five stocks have risen or remained at their starting levels, the return jumps to 15 per cent and increases in tiers of 10 per cent up to the maximum return of 65 per cent. Investors will get this amount if all 12 stocks remain at their starting levels or increase in values by the end of the term.
Compared with other guaranteed offshore bonds such as Scottish Life International's select income and growth bond, the Britannia International bond offers higher growth. Scottish Life International's bond offers two growth options which return 27.5 per cent and 35 per cent respectively. However, the Scottish Life International bond differs in that it tracks the performance of three stockmarket indices rather than individual stocks.
The advantage of racking indices is that the bond is diversified across many stocks and investors feel less of an impact when some perform badly. With the Britannia International bond, any poor performers will have a direct impact on the final return.