Wealth management group SG Hambros has established a guaranteed offshore bond that is linked to the FTSE 100 and Eurostoxx 50 indices for an 18-month term.
With its £50,000 minimum investment, the SG Hambros market recovery deposit is aimed at high-net-worth clients who think the stockmarkets are on the cusp of recovery, but who are reluctant to invest directly in equities because of recent volatility.
Investors get 100 per cent of their capital returned at the end of the term whatever happens to the indices, but any return above this will depend on the performance of the indices between September 18, 2002 and March 18, 2004.
To calculate the returns, the average growth of both indices is combined and will be passed on to investors up to the maximum of 29.99 per cent. If either index rises by 30 per cent or more during the term, investors will get a return of 3 per cent.
The bonds most attractive feature is its capital guarantee, which offers investors security while they are waiting to get back into the equity market. However, its £50,000 minimum investment make it inaccessible for many investors.
The high-net-worth clients it is aimed at may feel that the 18-month term exposes them to short-term volatility. They may also be put off investing in it by the possibility of getting a relatively low return of 3 per cent if ether index rises above the 30 per cent threshold.