nvesta and Keydata have introduced income-generating guaranteed
equity bonds for investors with different risk profiles.
nvesta's selecta plan is linked to the FTSE 100 and S&P 500 indices.
Under the cautious option, investors choose monthly income of 0.47
per cent, annual income of 6.1 per cent or 33 per cent growth after five
years. The dynamic option offers higher income of 0.65 per cent a
month, 8.1 per cent a year or 43 per cent growth at the end of the
Keydata's extra income plan issue 6 offers option one for investors
with a higher-risk profile and option two for more cautious investors.
Option one offers income of 7.25 per cent a year, 1.75 per cent a
quarter or 39 per cent growth after five years. Option two provides
annual income of 5.5 per cent, quarterly income of 1.33 per cent or 29
per cent growth at the end of the term.
Investors with both products risk capital losses depending on index
performance and the safety nets are identical. If the FTSE 100 index
falls by 30 per cent or more without recovering by the end of the term,
cautious investors lose 1 per cent capital for each 1 per cent fall in
the index under both products. Those who take the higher risk option
of either product will lose 2 per cent of capital for every 1 per cent fall
in the index.
However, the criteria for a full capital return is stricter for the nvesta
product because even if the FTSE 100 does not breach the 30 per
cent barrier, capital will be reduced where the S&P 500 index
breaches the 30 per cent barrier. This additional risk is the price
investors pay for the higher returns it offers compared with the