New season trackers look to millennium

THERE are at least three new tracker bonds to entice the cautious investor this week: AIB has launched Issue 5 of its Guaranteed Tracker series; MMI Stockbrokers has issued its second Multiplier guaranteed index bond while Riada Stockbrokers has entered the market for the first time with a unique Guaranteed World Equity Bond.

AIB's tracker is similar to others in the series providing full capital guarantee after a three or five year investment period (this time in the FTSE 100 and Nikkei 225 indices), a minimum investment of £2,000, and either a 75 per cent return on any growth in respect to each half of your investment if you choose the three year option or a return equal to 100 per cent of the rise in the relevant index if you choose the five year investment option. Any returns are tax paid (at 27 per cent). No withdrawals are allowed.

The first of the two MMI trackers (with Woodchester Credit Lyonnais Bank as the deposit institution) the Millennium Multiplier Bond allows for a maximum 50 per cent return on the investment if the two markets involved, the FTSE-100 and Standard & Poors 500, grow by just 10 per cent or more. If either market does not achieve a 10 per cent return, investors receive five times the growth achieved by the weaker market. The company claims that since the FTSE-100 was first set up, both these markets have achieved a 10 per cent growth level on 95 per cent of occasions. The investment period is three years and nine months, beginning October 25th, 1996 and ending on July 25th, 2000 with a minimum investment of £5,000.

The Millennium Growth Bond, which also runs until the year 2000 is exclusively linked to the performance of the Japanese Nikkei 225 and provides for a return equal to 110 per cent of the growth of the market. Capital invested in this bond is completely guaranteed but there are no minimum returns. Returns in this case are paid pre tax and Irish investors will have to declare their profits and pay the 27 per cent DIRT. Whereas the AIB bond averages out returns over the last six months of the contract to protect against sudden drops in the indices, this one does the same exercise on a weekly basis over the last year.

Riada Stockbrokers first ever tracker, the Guaranteed World Equity Bond is, like the others, fully guaranteed with the deposit taker being its Dutch parent bank, ABN-AMRO. A minimum £5,000 investment is required over a five year period and the bond is aimed at cautious investors with substantial sums on deposit.

What is unique about this product is that while it offers a maximum return of 80 per cent from growth in the basket of world stock market indices, it also behaves rather like a with profit type investment by promising to lock in annual growth, which then cannot be taken away, even if the market falls at a later date. According to Riada, "this stepping up each year in the maturity value will certainly produce better value in a market which fluctuates over a five year period because of what is known as pound cost averaging." In a strong steady market, the bond does not work to quite the same advantage and may not produce as good results as a tracker that follows the market absolutely.

Anyone considering a tracker bond investment should always seek independent advice in order to compare the benefits of one against another.