Type: Guaranteed equity bond
Aim: Growth linked to the performance of a portfolio of industrial metals and energy-related commodities
Minimum-maximum investment: £15,000-no maximum
Term: Four years
Return: 150% of any growth in the commodities portfolio
Guarantee: Original capital returned in full regardless of the performance of the underlying investments
Closing date: March 4, 2005
Commission: Initial 3%
Tel: 020 7861 0900
Dawnay Day Quantum’s protected commodities accelerator II is a guaranteed equity bond linked to the performance of a portfolio of industrial metals and energy-related commodities.
Informed Choice director Martin Bamford thinks this product could provide a secure introduction to the world of commodities and allow self-invested personal pensions or small self-administered schemes exposure to this often overlooked asset class. He feels there is currently a strong argument for investment in commodities, but warns this can be a volatile asset class, especially over the shorter term.
Bamford says: “We wouldn’t normally recommend an investment in commodities for less than 10 years, but the capital protection with this product makes a shorter investment period of four years a realistic prospect.”
Bamford believes the 150 per cent participation rate will look extremely attractive for investors. He adds: “The minimum investment is reasonable at £15,000 and will not put off Sipp and SSAS investors.”
Looking at the potential drawbacks of the bond, Bamford says: “As with any structured product, there will always be concerns about the financial security of the counterparty providing the backing for the protection.
“Also, a four-year investment term might not be long enough, especially for a pension fund investment where the investor could afford to hold an exposure to this particular asset class for much longer. As the plan is designed to provide capital growth, it will probably not be suitable for investors in retirement seeking an income.”
In conclusion, Bamford suggests the Merrill Lynch gold & general fund as a competitor to Dawnay Day Quantum although it provides exposure to commodities without the structured product wrapper.
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Good