Type: Capital-protected bond
Aim: Growth linked to the performance of the IPD UK index
Minimum-maximum investment: £7,000-no maximum
Term: Three years and five months
Return: 100% of the growth in the index at the end of the term
Guarantee: Original capital returned in full regardless of the performance of the index
Closing date: November 16, 2007
Commission: Initial 2% or initial 0.6% plus 0.5% renewal
Tel: 0207 747 7400
IAF Securities has teamed up with structured product consultancy Investment Design and Distribution to bring out a capital-protected bond linked to the IPD commercial property index.
Baronworth Investment Services managing director Colin Jackson regards the product literature as well written and easy to understand. “The participation of 100 per cent of the total return of the IPD UK annual index is very acceptable, particularly as it is coupled with 100 per cent capital protection.”
Jackson thinks the term of three years and five months makes a refreshing change from the five or six-year terms that are usually seen in the structured product market. “A major upside is the fact that any return is subject to capital gains tax, as opposed to income tax. The entry level of £7,000 is quite low and the level of commission is not overly generous, but this is to be expected with a relatively short-term product.
Turning to the potential drawbacks of this product Jackson says: “There is no facility to invest within an Isa wrapper or for an Isa or Pep transfer. So far as the former is concerned, it probably does not matter very much as most people do not utilise their full capital gains tax allowance. This means that, for those people, all or part of their returns will be tax free in any event,” he says.
Scanning the market for products that could compete. Jackson says: “I cannot locate any product that is comparable, either offering the same or similar term, or linked to the same index.
Summing up Jackson says: “This is an interesting product for people who wish to take a punt with commercial property in the UK but do not want to risk losing their original capital.
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Average