Keydata Investments has brought out a guaranteed equity bond that offers investors their original capital plus a return above this when the market goes up or down.
The innovative growth plan is linked to the FTSE 100 index for six years. Investors will get their original capital back at the end of the term regardless of the stockmarket movements but the level of growth on top of this will depend on whether the index has risen or fallen.
If the index rises, investors will get 80 per cent of this growth but if the index falls they will receive 1 per cent growth for every 1 per cent fall in the index, capped at 30 per cent.
To calculate the returns, the closing level of the FTSE 100 index is recorded at the start of the term and this is compared with the average closing levels of the index during the last 12 months of the term.
As the name suggests, this product covers new ground in the structured product market by offering growth related to stockmarket falls. By doing this, it has reversed a feature of precipice bonds, where capital is eroded on a percentage basis when the index falls. This may provide an extra comfort factor for investors who are worried that with some products, they risk coming away with just their capital when they would have got some interest using a building society account.
However, investors are paying for the each-way bet this product provides by accepting less growth in a rising market than some products are offering at the moment. It is possible to receive 100 per cent return of capital and 100 per cent growth through the Woolwich capital growth plan, although this has a shorter term than the Keydata product at five years and six months.