nvesta has established a guaranteed equity bond that pays three times the growth in the index to which it is linked.
The triple tracker plan is linked to the FTSE 100 index for a term of five and half years. Investors will get their original capital returned in full provided the FSTE 100 never falls by more than 50 per cent during the term. If it does fall by this amount, investors will still get a full capital return if the index recovers to at least its level at the start of the term.
Where this does not happen, capital will be reduced by 1 per cent for every 1 per cent fall in the index. On top of the capital return, investors will get three times the growth in the FTSE 100 index, but this is capped at 75 per cent.
This bond adds another twist on the well-worn theme of guaranteed equity bonds by offering triple the rise in the index. However, the cap on this growth at 75 per cent means investors would benefit the most if the index rises by up to 25 per cent. The cap prevents all the growth being passed on to investors if there is a bigger increase than 25 per cent.
Some bonds that have a conditional guarantee offer investors the choice of income or growth. NDF's higher income & growth plan 3 is an example of this. Comparing the two products in terms of growth, the NDF product provides a lower return of up to 50 per cent and the rate of capital reduction for falls in the FTSE 100 index beyond 40 per cent is double that of the nvesta product.