NDF's European defined bonus plan is a capital-protected bond that is linked to the performance of the Dow Jones Eurostoxx 50 index for six years. However, it could mature in years one to five, depending on the level of the index at each anniversary.
Assuming the product runs full term, investors will get 100 per cent of any rise in the index plus all their original capital back unless the index falls by at least 50 per cent does not recover to its original value by the end of the term. If the worst happens and the safety net is breached, investors stand to lose 1 per cent of their capital for every 1 per cent fall in the index.
The early maturity trigger will kick in only if the index is the same or higher than its start value at each anniversary. If this occurs in year one, investors will get a total return of 110 per cent, in year two 120 per cent, in year three 130 per cent, in year four 140 per cent and in year five 150 per cent.
This product is unique as there are currently no other structured products linked to the European index. The majority gain exposure only to the UK through the FTSE 100 index, so this bond could be welcomed by some investors for providing something different.
However, the product's main drawback is its unpredictability. Investors go into the product not knowing how long the investment term will last or how much they will get back at the end of the term, despite having a rough idea of what will happen in each situation.
These factors suggest it may be more suitable for investors who have some experience of direct equity exposure rather than investors who want their capital plus a return at a specific time for a specific purpose.