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Keydata locks in growth

Keydata Investments has unveiled the second issue of the FTSE growthbuilder plan, a guaranteed equity bond that locks in 20 per cent growth for each 20 per cent rise in the FTSE 100 over six years.

The bond is identical to the maximum growth option that was available on the first issue of the product. It has maximum growth potential of 100 per cent and the original capital will be returned in full unless the index falls by more than 50 per cent without bouncing back to its initial level. If this safety net fails, capital will be reduced by 1 per cent for every 1 per cent fall in the index below the initial starting level.

The lock-in feature is a strong point as the growth that is built up cannot be taken away, but a potential drawback is that it is built up in 20 per cent blocks. For example, if the FTSE 100 index rises by 50 per cent at any time, only 40 per cent will be locked in. However, investors could potentially receive higher growth than the locked-in value if the final index level results in a higher level of growth. For example, the 40 per cent locked-in growth would be ignored if the index rose by 50 per cent by the end of the term.

Pinnacle has a six-year FTSE 100 linked guaranteed equity bond that has a lock-in feature but this is limited in comparison with the Keydata product. If the FTSE 100 index has risen by at least 21 per cent after three years, 21 per cent growth is locked in. Investors with Pinnacle will also get their original capital returned in full regardless of the index performance, which is one advantage it has over the Keydata product.


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