Nvesta has brought out the secure multi-tracker plan, a guaranteed equity bond linked to the performance of three stockmarket indices - the FTSE 100, S&P 500 and Nikkei 225.
The bond has a term of six years and provides a full capital guarantee regardless of the performance of the indices. Investors will also receive 110 per cent of the average growth across the basket of indices.
To calculate the returns, the closing level of each index is recorded on October 29, 2004 and compared with the average monthly closing levels during the last year of the term. A final average is then produced which takes into account the rises and falls in each index. Each index is weighted equally in the portfolio.
Nvesta believes linking the product to three indices provides a diversified equity exposure as the returns are not dependent only on one region. However, the company points out that the use of averaging in the final 12 months can constrain growth in a rising market but will protect the level of growth in a falling market. This is also true if applied in a geographical context in that one index may be rising while another one is falling, so the growth in the former is constrained but this will provide a cushion against falls in the latter.
The Nvesta plan is currently the only onshore product linked to a basket of indices for six years. Other providers such as Royal London and Bristol & West have similar products with a five-year term, and some investors may prefer these if they feel six years is too long.
However, these products do not offer a geared return across the indices - Royal London's product has a participation rate of 80 per cent, while Bristol & West provides the greater of 15 per cent of the original investment or 50 per cent growth in the indices.