Inora Life has added the safeguard fund to its offshore generation bond range.
This Dublin-based capital protected fund is designed for growth and is also available as an Isa. It is linked to the FTSE 100 index for six years.
To calculate the return, the average level of the FTSE 100 index over the first six months is recorded and is then measured again at the end of the third year. If it is 20 per cent or more higher than the starting level, a 20 per cent minimum return is guaranteed. The starting level of the index is then reset and measured against the average level of the FTSE 100 index during the final 12 months of the term. Investors get 100 per cent of this growth.
The bond is unusual in that any growth in the first three years is locked-in to provide a 20 per cent minimum return. This may be a good thing for cautious investors who are worried about ending up with only their original capital after six years. But, the drawback is that they will not fully benefit from higher growth in the early years because of the 20 per cent.
Receiving 100 per cent of growth in the final three years may be attractive because there is no cap on growth. This means investors would benefit most if the index performs better during the latter three years. However, stockmarkets have been at a low level for some time and investors may lose out on growth if share prices start to recover during the next three years, then fall back during the final years of the investment.