Ulster Bank's new "Discovery" tracker bond has an averaging period of six months while MMI Stockbroker's "Capital Plus" and "Multiplier 10" bonds average growth over the last 18 months - too long according to some experts. The Discovery bond, which requires a minimum investment of £5,000, offers two investment periods: three and three-quarter years and five and three-quarter years. If you choose the shorter term you can earn up to 40 per cent gross (9.39 per cent CAR) on condition that the S&P 500 and the FTSE-100 rise by 20 per cent or more over the term, or 20 per cent gross (4.98 per cent CAR) if the markets rise only 10 per cent. If you choose the longer saving term you can earn up to 75 per cent gross (10.22 per cent) if both indices rise by 30 per cent over the period, or up to 30 per cent gross (4.67 per cent CAR) if they rise by 15 per cent. You can split your investment evenly between the two time periods.
Ulster Bank points out that since 1984, markets have experienced rises of 40 per cent over rolling three-and-three-quarteryear periods - nearly nine out of every 10 occasions. Markets have produced gross returns of 75 per cent over rolling five-and-threequarter-year periods on just over nine out of 10 occasions.
The MMI bonds - the `Capital Plus' and `Multiplier 10' - require minimum investments of £3,000 over three-year and 10month periods. The Capital Plus is aimed at cautious investors and offers the capital guarantee plus 100 per cent of any growth achieved by a basket of world currencies, of which the Japanese Nikkei represents 44 per cent.
The Multiplier - like a recent BCP bond - guarantees only 90 per cent of capital but will pay up to 150 per cent return on any performance of the world indices.
Aside from the lower capital guarantee on the Multiplier 10 bond, it is important to note the 18-month averaging period, which could have an adverse effect on final maturity payouts. All tracker bond profits are subject to 26 per cent DIRT.
Both offers close on November 21st. In order properly to assess the pros and cons of these bonds you should always seek independent advice.
See also page 3
