Type: Capital protected bond
Aim: Income linked to the performance of the DJ Eurostoxx 50 index
Minimum-maximum investment: £10,000-£1m, Isa £4,000-£7,000
Term: Five years
Return: 7.5% income a year or 1.8% a quarter
Guarantee: Original capital returned in full at the end of the term provided the index is at least 110% of its initial value
Closing date: November 21, 2006, November 7, 2006 for Pep/Isa transfers
Commission: Initial 3%
Tel: 01727 734 315
It is a long time since Baronworth director Colin Jackson has seen a product of this type, where return of capital is dependent upon an actual increase in the index. He is not enthusiastic about this.
Although the return of capital is linked to only one index, it is the Dow Jones Eurostoxx 50, which is not Jackson’s favourite. “More importantly, if the final index level is less than 110 per cent of the starting index level then return of capital will be reduced on a one-for-one basis. Although the headline rate is 7.5 per cent year, in my view, the risk far outweighs the potential return,” says Jackson.
Looking at the positive aspects of the product Jackson says: “As I have come to expect from NDF, the literature is extremely well presented and easy to understand. The adviser remuneration of 3 per cent is in line with the majority of the market. Unfortunately, there is little more that I can say that is good about the product and we would be surprised if many of our clients were interested in it.”
He believes that competition will come from nearly every other structured product where return of capital is not dependent upon growth in the index.
Suitability to market: Poor
Investment strategy: Poor
Advisory remuneration Good