Bristol & West has established the portfolio bond, a capital-protected bond that is invested in three different elements to provide income and growth over a term of six years.
Investors will need to have at least £30,000 to invest in this product. One third of the capital is invested in the guaranteed income account, a fixed-rate savings account which provides income of 7 per cent a year. Another third of the capital goes into the guaranteed FTSE account and will provide a full capital return plus 75 per cent of any growth in the FTSE 100 index. The remaining third is invested in the guaranteed property account which will provide a full capital return plus 75 per cent of any growth in the Halifax House Price index.
The returns of each element are calculated separately. In respect of the FTSE 100 linked element. The closing level of the FTSE 100 index is taken on December 14, 2004 and compared with an average of the closing levels during the final year of the term. The returns of the guaranteed property account are based on the difference between the Halifax House Price index in November 2004 and the monthly average produced over the final year of the term.
This product is unique as it is currently the only product to offer and income and growth with exposure to the FTSE 100 and Halifax House Price indices. Britannia Building Society and Birmingham Midshires both offer five-year products divided between a fixed-rate savings account and a FTSE 100 linked guaranteed equity bond but these have no exposure to property prices.
This product could be useful for cautious investors with a long-term view who are looking for more diversity than a normal building society can offer. However, reports of a slowdown in UK property prices and expectations that the market will remain static due to factors such as rising interest rates may make the property element of the product less appealing.