Merrill Lynch HSBC has designed the global growth protected investment product, a guaranteed equity bond that is only available through the internet.
The bond tracks a basket of four stockmarket indices the FTSE 100, Standard & Poor's 500, Nikkei 225 and Eurostoxx 50 over a five-year term. If it is held until maturity, investors are guaranteed to get back 100 per cent of their original capital plus a guaranteed minimum return of 15 per cent.
If the average performance of the stockmarket indices is greater than 15 per cent, investors will get a bonus of up to 40 per cent. This means that the maximum potential return is 155 per cent of the original investment.
The global growth protected investment product can be used as a home for maturing tax exempt special savings accounts for those who want to tie their money up for another five years. It could also suit investors who want stockmarket exposure without the full risks of direct stockmarket investments.
The guaranteed minimum return is an attractive feature as some bonds only guarantee that the original capital will be returned. However, investors who do not hold the bond until maturity are not covered by the guarantee and could put their original capital at risk.
The EuroStoxx 50 index rose from 2282.22 points on May 16, 1997 to 4237.31 points on May 16, 2001.