Newcastle Building Society has introduced the second issue of its
balanced equity bond.
This bond marries the fifth series of Newcastle Building Society's
global guaranteed equity bond with a fixed rate savings account.
Investors must place half their investment into each element.
Interest on the savings account element is fixed at 7.5 per cent gross
until March 28, 2002 and no withdrawals can be made before that
date. The global guaranteed equity bond element is linked to three
stockmarket indices - the FTSE 100, Nikkei 225 and Eurostoxx 50
over a five-year term.
A full capital guarantee ensures that investors get all their original
investment back, even if the indices show poor performance during
the term. The final return is based on 85 per cent on the average
growth in the three indices between September 28, 2001 and
September 28, 2006.
The bond may attract investors with building society accounts who
are looking for something different after feeling the impact of the
latest cut in interest rates. Splitting their investments between the two
elements enables them to boost their returns without risking their
capital through direct stockmarket exposure and the use of three
indices ensures diversity.
However, this product may not suit everyone as they cannot decide for
themselves how much to place in each element and some investors
may prefer a longer fixed rate on the savings account element.
The Eurostoxx 50 rose from 1622.40 points on August 16, 2006 to
3700.95 points on August 16, 2001.