Bristol & West's balanced guaranteed equity bond allows investors to put their investment in a stockmarket-linked bond or to split it between the bond and a one-year fixed rate high interest account.
The guaranteed equity bond element tracks three stockmarket indices the FTSE 100, Eurostoxx 50 and Nikkei 225 over a six-year term. It guarantees the return of the original capital however these stockmarkets perform and investors also get 80 per cent of the average growth in the indices.
An average is taken of each index during the first 12 months and again in the last 12 month of the term. This will protect investors from sharp dips, but it also means they will not benefit from sudden stockmarket peaks. The final return is based on an average figure of all three indices.
Investors can place up to half of their investment in a one-year fixed rate bond paying 7 per cent gross a year. They might want to do this if they need to get instant access to some of their money since they cannot make withdrawals from the guaranteed equity bond.
Northern Rock has a similar combination product called fifty-fifty, which is split equally between a high interest account and a guaranteed equity bond that is linked only to the FTSE 100 index over five years. It also guarantees the return of capital however the index performs.
Compared to this product, the Bristol & West bond is more flexible since it allows investors to choose how they split their investments, if at all. It also ensures diversity by tracking three indices rather than one, but this could also be a drawback as one index could underperform and drag down the final return.