The Investment Management Association (IMA)s latest set of research has revealed that investors of tracker funds would have received higher returns in 9 out of 10 cases, compared with National Savings & Investments (NS&I) Guaranteed Equity Bonds (GEBs).
Tracker fund return averaged 1,695 more than the return on GEBs, based upon an investment of 10,000 over a 5 year period.
Our research lays bare the reality of many structured products, says Richard Saunders, CEO at IMA. Alluring marketing claims conceal high costs, hidden risks and uncertain returns. In the case of Guaranteed Equity Bonds, investors paid large sums of money for protection against a contingency that arises relatively rarely, with the cost out of all proportion to the benefit received. With investment products, there is no substitute for simplicity and transparency these are the standards regulators need to adopt in overseeing the market.
Looking at the ten GEB issues that have matured to date, an investor would have gained an average of 1,933 in each of the nine years the tracker fund outperformed, and would have lost only 449 the one year the tracker fund underperformed the GEB, according to IMA.IMA compared the returns of GEBs, a form of structured product that the NS&I have issued since 2002 with those that their investors could have obtained from investments in the stock market through FTSE100 tracker funds.
A GEB is a NS&I product, which offers investors returns linked to the FTSE100 index with a guarantee of a full return of their initial investment if the FTSE falls over the five year term.performer