Newcastle Building Society is reaching out to investors who like a bit of reassurance with the capital safe bond.
Capital safe is a guaranteed equity bond aimed at cautious investors who want to invest in the stockmarket and are reassured by the fact the bond comes with a capital guarantee.
Over its five-year term capital safe will invest in the FTSE 100, Eurostoxx 50 and Nikkei 225 indices. The starting levels of the indices will be measured from December 7, 2001. Their closing levels will be the average figure, based on the level of each index, on the first business day of each month from January to December 2006. This will smooth out any sudden drops in the value of the index over the short term.
Even if all the indices fall in value the investor will still get their original capital back. If they rise, then the investor will get up to 85 per cent of the average level of growth of all three indices.
The Newcastle bond is similar in structure to the Bristol & West five-year guaranteed equity bond. This also invests in the FTSE 100, Eurostoxx 50 and Nikkei 225 indices and returns the capital at the end of five years, even if the indices fall in value. However, the Newcastle product allows up to 85 per cent of any growth, while the Bristol & West product only allows up to 70 per cent.
Over a five-year period from October 17, 1996 to October 17, 2001 the FTSE 100 index went from 4,042.1 points to 5,203.4 points, the Nikkei 225 index went from 21,423.7 points to 10,755.4 points and the Eurostoxx 50 index went from 1,723.2 points to 3,531.7 points.