Britannia International is making it possible for UK expatriates to take advantage of the UK property market and stockmarket through the double index growth bond.
This offshore bond takes the trend for guaranteed equity bonds one stage further by linking the investment to the FTSE 100 index and the Halifax Standard Index of House Prices (HPI).
Half of investors capital will track the FTSE 100 index over a five-year term, while the other half tracks the HPI. Whatever happens to the indices, investors will still get their original capital back and will also receive 100 per cent growth in the indices. The returns from each index are calculated independently of each other, so even if there is no growth in one index, investors will still get 100 per cent growth in the other index.
To calculate the returns, the level of each index is measured at the start of the term and this is compared to the final level, which is the average index level over last 13 months of the term. This feature is designed to protect investors from sharp dips in the property market towards the end of the term.
The product is an innovative variation on guaranteed equity bonds and could appeal to UK expatriates who want some exposure to the UK property market without investing in it directly. However, one drawback is that investors cannot decide for themselves how to split their investment across the two indices.
Figures from Halifax for March 2002 show the HPI rose by 16 per cent compared with the same period in 2001. However, there is no guarantee that growth in the housing market will be sustained at current levels over the next five years.