Secure Multi-Tracker Plan
Guaranteed equity bond
Growth linked to the performance of the FTSE 100, S&P 500 and Nikkei 225 indices
110% growth in the indices
Original capital returned in full regardless of performance of indices
October 22, 2004,
October 15, 2004 for Pep/Isa transfers
Initial 3% or
initial 2.5%, renewal 0.25% for five years
Tel: 020 7454 0704
Nvesta's secure multi-tracker plan is a guaranteed equity bond linked to a basket of three indices over a six-year term.
Arch Financial Planning managing director Arthur Chllds thinks it is a delight to have this product available as it could benefit clients looking for diversification. He says: “A particularly interesting feature is the use of an equally weighted basket of indices rather than the FTSE 100. As I understand it, an advantage of this strategy is that derivatives cost less than those based on a single index. This has no doubt helped to push up the participation rate which is an attractive 110 per cent, uncapped.” He adds that clients will also benefit from investing in the US and Far East without taking any currency risk.
Childs points out that the product has been assessed by independent structured product analyst, Future Value Consultants (FVC), as 8.75 out of 10 for both a basic and higher-rate tax payer with Isa or CGT allowances available.
He explains: “FVC considers 7.5 per cent and above to generally indicate a good product. The FVC probability table of product outcomes shows a 56 per cent chance of the product returning 0-5 per cent a year, a 22 per cent chance of returning 5-10 per cent a year and a 22 per cent chance of returning in excess of 10 per cent a year.”
On the down side Childs considers the six-year term without the prospect of any income too long. The averaging in the final year of the term seems an unnecessary safety feature to Childs bearing in mind the initial capital is secure. He thinks this will tend to dilute the potential for a healthy level of gain. He adds: “We also need to be quite cautious with older clients because the original investment amount is not secure on death.”
Scanning the market for possible competitors Childs says: “I particularly like the Manor Park guaranteed global growth fund which has a similar structure, but with options to reduce the capital protection to 95 per cent and increase the participation rate up to 150 per cent.”
He concludes: “The real competition will be the next issue of the National Savings guaranteed equity bond. The Achilles heel of the National Savings product for all but non-taxpayers is that all profits are liable to income tax in the year of maturity. At least those investors who get in touch with an IFA rather than buying over the post office counter will avoid this particular tax charge.”
Suitability to market: Good
Investment strategy: Good
Adviser remuneration: Average