Citigroup has established the enhanced growth plan, a guaranteed equity bond that allows investors to link their investment to the FTSE 100 index for six years or the Dow Jones Global Titans 50 index for four years.
Both options have an early maturity feature and will provide a full capital return at the end of the term regardless of the performance of the indices. Investors who choose the UK enhanced growth option will also receive 30 per cent of their original investment if the FTSE 100 has risen by at least 30 per cent at the end of year three. If this does not happen, the bond will run full term, paying out 130 per cent of the growth in the index in year six.
Investors who choose the global enhanced growth option will receive 14 per cent growth at the end of two years of the index has risen by at least 14 per cent. Otherwise the product will run full term, paying out 114 per cent of the growth in the index in year four.
This product offers a two-in-one choice between the options, enabling investor to focus on the domestic market, the global market or a combination of the two. A good feature is that full capital protection is offered in a way that still gives investors the potential to achieve geared exposure to the indices.
The presence of the early maturity feature makes this possible, as the chance of the product running full term is offset by the chance of it maturing early when the indices are performing well.
However, this introduces an element of uncertainty into the equation as investors will not know at the outset how long the term is and when they will get their money. This may be problematic for cautious investors who want full capital security but who are saving for a specific purpose during a set time horizon.