Type: Income bond
Aim: Income or growth by investing in cash and insurance contracts
Minimum-maximum investment: 4,000-no maximum, Isa 7,000
Term; Five years
Return: 7.5% income a year, 1.875% income a quarter or 43.5% growth over five years
Guarantee: Original capital returned in full unless insurance companies default or the maturity rates of the insurance contract change
Closing date: September 16, 2005, September 2, 2005 for Pep/Isa transfers
Commission: Initial 3%, renewal 0.5%
Tel: 020 7710 6906
Keydatas secure income bond provides income or growth by investing in cash and insurance contracts.
Baronworth director Colin Jackson feels this products headline rate of 7.5 per cent a year fixed for five years is highly attractive. “While return of capital is not guaranteed, it would seem that in view of the nature of the underlying assets, the risk should be fairly low,” he says.
Jackson also finds it reassuring hat the insurance contracts have a minimum credit rating of “A” from Standard & Poors or equivalent agencies and that currently over 90 per cent is invested in contracts issued by companies with a credit rating of “AA” or above.
Casting an eye over the product literature Jackson says: “It is very clear except there is insufficient explanation as to what the insurance contracts actually are and there is no explanation of the actuarial model that they refer to.
Jackson likes the facility to invest into an Isa or Isa/Pep transfer, and the ability to take annual income, quarterly income or growth. “Commission is slightly better than one would expect with this type of product in that it pays not only 3per cent initial commission but also trail commission of 0.5 per cent,” he says.
According to Jackson, this product should appeal to people who are looking for a high level of income fixed for a reasonable period of time where return of capital, although not guaranteed, is not linked to an index.
Discussing the less attractive features, Jackson complains: “The literature is lacking with regard to explaining what the insurance contracts and actuarial model are.” He cannot see any other product on the market that offers similar underlying investments and feels this novel approach to a structured product incorporating household names. “This can only reassure potential investors,” he says.
Suitability to market: Good
Investment strategy: Good