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Financial markets

Halifax Launches First Guaranteed Equity Bond, Joining Growing Industry Trend

Strategic Insights

— 2 min read

The Halifax Building Society has introduced its first guaranteed equity bond, providing investors with a low-risk opportunity to participate in the stock market while protecting their initial investment. This move follows a growing trend among building societies and financial institutions offering similar products, which give investors a chance to benefit from equity investment while safeguarding their capital.

Key Takeaways:

  • The Halifax's guaranteed equity bond offers a return of 100 per cent or more on the growth of the FT-SE 100 Index over a five-year period, with an interest-rate alternative to the money-back guarantee.
  • Other building societies, such as Birmingham Midshires and Norwich & Peterborough, are also offering similar products, each with varying degrees of security or risk, and offering different minimum interest rates or lock-in options.
  • Guaranteed equity products are based on futures and options, allowing providers to buy into the stock market at today's prices, and enabling the creation of various packages with different features.
  • Investors can choose between different products, such as the Halifax's 15 per cent gross interest or 100 per cent of the growth in the FT-SE, or Birmingham Midshires' Equity Linked Savings Account (Elsa) offering 100 per cent of any rise in the FT-SE over a six-year period or 24 per cent gross interest.
  • Some products, like Save & Prosper's bond, offer a lock-in facility, guaranteeing a return based on certain market rises, while others, such as the NatWest Guaranteed Stockmarket Bond, provide a 25 per cent lock-in.

Statistics:

  • The Halifax's guaranteed equity bond offers a minimum interest rate of 15 per cent gross or 100 per cent of the growth in the FT-SE over five years.
  • Birmingham Midshires' Equity Linked Savings Account (Elsa) offers 24 per cent gross interest (18 per cent net) over a six-year period, or 100 per cent of any rise in the FT-SE.
  • Norwich & Peterborough's Guaranteed Equity Bond II offers 25 per cent gross (18.75 net) over a five-year term, or 100 per cent of the growth in the FT-SE.
  • Save & Prosper's bond offers a 140 per cent return on 95 per cent of the initial investment, with no lock-ins, but a limit on the amount of gain.
  • Most bonds employ an averaging process over the final three or six months, while others take the level at the end of the term.

Sources:

  • Byline: DAVID HUNT HALIFAX
  • Source 1: Halifax's guaranteed equity bond information
  • Source 2: Birmingham Midshires' Equity Linked Savings Account (Elsa) information
  • Source 3: Norwich & Peterborough's Guaranteed Equity Bond II information
  • Source 4: Save & Prosper's bond information
  • Source 5: Independent adviser BESt Investment Brokers Ltd. (071-936 2037)

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