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Fidelity Capital Guaranteed Bond

Friday, 23 February 2007
What is it called and what sort of savings product is it?
The Fidelity Capital Guaranteed Bond is a listed debt security currently raising $75 million through an initial public offering (IPO).

Who is the company behind it?
The promoter is New Zealand life and investment company Fidelity Life, and Westpac Bank is providing the capital guarantee. Actual funds management is being done by Promina subsidiary Tyndall Investment Management.

Who is the target market?
This appeals to people happy to invest in structured products and wanting the mix of capital protection, alongside high possible returns.

What return does it offer?
The bonds are aiming to pay 9.25% annually with payments twice a year.

When was it launched?
February 15.

What other products is it like or is it competing with?
The Fidelity bond is playing against other capital guaranteed products such as those from Liontamer (we will have its new Bric Fund next week), and Man Investments OM-IP funds.

Is it long term, short term or medium term?
Its term is 6.3 years! The maturity date is July 15, 2013.

What is the unique selling point?
While it is like other structured products this one has the advantage of being listed on the NZDX market. The investment strategy developed by Tyndall is unique in the market and, while complex to the average investor, has performed well since it started several years ago. The unlisted version of the fund is available through Fidelity and its financial advisers.

How strong a stomach do you need for it?
Pretty mild. While the investment strategy could be considered risking (writing options) there is the capital guarantee from Westpac which gives you comfort about your capital - but not your income.

What's the hitch?
There aren't a huge number of hitches with this fund. Your capital is protected and the interest rate is good and the managers have shown they can deliver the numbers. The biggest risks are probably around the managers making some bad calls, or leaving the firm.

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