Type: Guaranteed equity bond
Aim: Growth linked to the performance of the FTSE 250, MSCI World, Epra, Dow Jones AIG Commodities, HFRX Global Hedge Fund and iBoxx Euro Sovereigns Eurozone indices
Minimum-maximum investment: £10,000-no maximum
Term: Five years and two weeks
Return: 100% of the growth in the indices at the end of the term
Guarantee: Original capital returned in full regardless of the performance of the indices
Closing date: October 5, 2007
Commission: Initial 3%
Tel: 0845 0091805
Meteor Asset Management has brought out a guaranteed equity bond linked to a range of asset classes through six stockmarket indices over a term of five years and two weeks.
Baronworth director Colin Jackson says: “On the face of it this is an extremely attractive product offering 100 per cent of any rise in the value of the portfolio coupled with 100 per cent capital security at maturity.” Jackson likes the literature, describing it as eye-catching and very well produced. “It is easy to understand apart from some of the explanations of the portfolio.”
Turning to the potential drawbacks Jackson feels that through no fault of Meteor, rainbow may be launched at the wrong time. This has impacted on his scoring of the product as he would have given it 8/10 in normal markets.
”It could be totally the wrong time to launch this type of product. The returns are based upon a portfolio of six indices that include global equities, UK equities and hedge funds. Potential investors may be put off by what they have read in the press over the last week or so, particularly relating to hedge funds. This will be most unfortunate if it spoiled the chances of a successful launch for what I consider to be, in the normal course, an attractive investment.”
Jackson also has some gripes about some of the definitions of the portfolio in the literature. “Will the average investor know what, for example, is euro-denominated debt, fixed and zero coupon bonds, convertible arbitrage, merger arbitrage, equity hedge, distress securities and so on? This leads me to believe that this product is probably only suitable for the more sophisticated investor.”
He also complains that there is no provision to invest through and returns are subject to income tax as opposed to CGT.
Jackson concludes: “I have never known any product provider to quote from the Talmud as a sales aid. Perhaps Meteor should simply add a quote from the bible – and there shall come a great profit.”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Good