FRIENDS Provident, the life assurance company has finally thrown its hat into the tracker bond market with the launch of its Guaranteed Global Investment Bond. Unlike other trackers, which follow the performance of one or more stock exchanges, this one takes a novel path in that it will track the performance of the world's top 10 stocks as ranked by the Financial Times.
There is a minimum investment of £3,000 in this bond which guarantees not only capital back after the six year term but that you will receive 115 per cent (net of tax) of the growth of these companies over the six years subject to a maximum possible return of 215 per cent over the period. Past performance should not be the only gauge by which a person invests in a product like this, but Friends Provident points out that had someone invested £10,000 in the same group of companies six years ago, the tracker would have produced an 81.65 per cent return, worth £8,165. The total return would have been £18,165. The attraction of a tracker like this is that the companies represented, are, for the most part, familiar, household names - 'blue chip stocks' - and would be considered low risk investments. The disadvantage with this type of product does not lie with the representative stocks, but the fact that the investor must commit his or her money for a full six years (one year longer than most trackers) or lose the capital guarantee. The issue closes on March 31st.
Meanwhile, AIB/Ark Life has also brought out another tracker - the sixth - in its series of bonds. This latest one, which closes on March 29th, is a combined Japanese Nikkei 225 and Eurotrack 100 index (which monitors the top 100 European stocks, excluding the UK) in which your capital is equally divided between the two indices. (You can request a different weighting, say Ark Life.) The minimum investment is a modest £2,000 for a five year term, and you are guaranteed your capital back after the five years, plus a return equal to any rise in the two indices. As with the Friends Provident bond, 27 per cent tax is deducted at source and no other tax is payable.
