NDF Administration has brought out a capital-protected bond that can
be linked to the Halifax House Price Index, the FTSE 100 index or a
combination of both indices for six years.
The bond will return all investors' original capital at the end of the
term regardless of index performance. Investors will also get 100 per
cent of the rise in their chosen index or 100 per cent of the average
rise in both indices if they split their capital between the two.
There are five options available to investors in total. Under option
one, 100 per cent of the capital is linked to the Halifax House Price
index, while option two provides a 75 per cent-25 per cent split in
favour of the Halifax index. Option three offers an equal split between
both indices while option four is a 75 per cent/25 per cent split in
favour of the FTSE 100 index. Finally, option five is 100 per cent linked
to the FTSE 100 index.
To calculate the returns, the closing value of the indices are recorded
at the start of the term and compared with an average produced over
the final 18 months of the term. If the indices have fallen or stayed the
same, investors will receive only their original capital. But if there has
been some growth, investors will receive 100 per cent of this growth.
Newcastle Building Society is currently offering a similar product, the
guaranteed mixed asset bond issue one. This has a term of five
years and six months and although it is linked to the same indices on
similar terms to the NDF product.
However, investors cannot deviate from the Newcastle product's
pre-defined 50/50 split. This lack of flexibility could be regarded as a
drawback, but some investors may prefer the Newcastle product if
they feel a six-year term is too long.