Man Investment Products has introduced an offshore bond with a capital guarantee.
The third series of Man IP 220 plus is registered in Bermuda and invests in futures and hedge funds. Investors are guaranteed to get back at least 100 per cent of their original investment.
Investors can choose between a US dollar and a euro denominated bond. The US dollar bond has a target return of 18-20 per cent and matures on December 31, 2011. The euro denominated version aims to return 17-19 per cent when it matures on December 31, 2012. The target return is different for each version to take into account the difference in the value of the euro and the dollar.
There are signs that hedge funds are becoming more mainstream, but they are still the preserve of experienced investors and high-net worth clients who want to benefit from the potentially high returns. Similarly, futures are essentially a way of trading geared contracts and may be a suitable investment for sophisticated and adventurous investors.
Although some hedge fund strategies are less risky than others, the overall risks of hedge funds and futures are likely to be too high for clients who need the security of a capital guarantee.
However, the advantage that Man IP 220 plus series three has over single hedge funds is that it diversifies investment risk over a range of hedge fund strategies and futures.