Keydata Investment Services has introduced a third issue of secure growth portfolio. It differs from previous versions by offering capital protection at the lower level of 80 per cent.
The bond is linked to a portfolio of six externally managed Oeics over a five-year term. These are HSBC UK growth & income, Norwich Union European equity, JP Morgan Fleming premier equity growth, New Star UK growth, Newton income and Threadneedle American select growth.
The HSBC, New Star and Norwich Union funds carry the highest weighting at 20 per cent of the portfolio. The Newton and JP Morgan Fleming funds comprise 15 per cent each and just 10 per cent goes into the Threadneedle fund. To calculate the final return, the monthly price of each fund is averaged out throughout the investment term.
Where 100 per cent of the capital is protected, 100 per cent of the average of any growth in the funds is payable. Protecting 90 per cent of capital gives 150 per cent growth and 80 per cent capital protection gives 200 per cent of the average growth in the funds.
This bond could suit investors who are willing to give up some of the growth potential in these funds in return for capital protection. However, the capital protection only works where the investment is held for the full five years, otherwise capital will be eroded through the penalties that are payable upon early surrender.
According to Standard and Poor's HSBC UK growth & income is ranked 24 out of 244 funds, JP Morgan Fleming premier equity growth fund is ranked 93 out of 244 funds and Newton income is ranked 44 out of 244 funds. Norwich European equity is ranked five out of 89 funds and Threadneedle American select growth is ranked eight out of 75 funds, based on £1,000 invested on a bid-to-bid basis with net income reinvested over three years to March 4, 2002. There is no three-year past performance for New Star UK growth.