Keydata Investment Services has established a guaranteed equity bond that offers three options.
Investors in the extra income plan can choose annual income of 7.5 per cent, quarterly income of 1.825 per cent or 41 per cent growth at the end of the five-year term.
The bond is linked to the FTSE 100 index and investors will get all their capital back, provided the index does not fall by more than 40 per cent at any time during the term. Even if a fall of more than 40 per cent occurs, investors will get their capital back if the index recovers to at least its starting level.
The starting level is the closing value of the index on September 6, 2002 and this is compared with the final level, the closing level of the index taken on September 6, 2007.
Where the index falls by more than 40 per cent without recovering to its starting value, capital will be reduced by 1.5 per cent for every 1 per cent fall in the index. This means that no capital will be returned where the index falls by 66.7 per cent or more, but income and growth payments will still be made.
This product may be attractive to income investors who want some degree of capital protection from a product that is linked to a single index that they are familiar with. However, capital erosion is a possibility, so it is unlikely to suit investors who need income, but not at the expense of their capital.