BCP Lock-In Coupon Bond

[Brendan Burgess]

I have read this brochure a few times. You can find it on the BCP website.

I don't see the catch, but I am sure that there is one.

The fund tracks a basket of 24 shares.

Its capital value is guaranteed.

It pays 2% income minimum.

It pays up to 9.7% per annum CAR.

"The growth applicable each year is based on the starting value in December 2007 and not the value at the anniversary date".

The example it gives for an investment when the starting level is 100

At the end of year 1, if the index is at 109, you get 9%

At the end of year 2, if the index is at 111, you get 11%

They deduct the 2% interest, so you get 7% and 9%. At the end of year two, your bond is worth 116%.

OK, they don't pay you dividends which you would get in a direct investment in the shares. The annual returns are added rather than cumulative, but even so, it seems great value.

Brendan

 

[z105]

I wonder about the management costs ? Did I miss these on the brochure ?

 

[Brendan Burgess]

Not relevant as they are not deducted from the returns quoted.

There is no mention of any charges such as entry charges.

Brendan

 

[ClubMan]

These are the guys who offered the quadruple bond that could never quadruple - right?

 

[Brendan Burgess]

Correct. And despite my frequent complaints to the Financial Regulator, they are still offering a Quadruple Growth Bond.

Brendan

 

[ClubMan]

Maybe past performance is relevant when it comes to misleading punters?

 

[czechmate]

Not relevant as they are not deducted from the returns quoted. There is no mention of any charges such as entry charges. Brendan

The key features document mentions that 4.34% of the money goes to pay BCP (2.25%) and the intermediary (2.09%). I think this effectively means that this is the charge. So about 1% per annum?

 

[Brendan Burgess]

Yes. But that is irrelevant as far as I can see. Those charges are not deducted from the performance.

Brendan

 

[czechmate]

Yes. But that is irrelevant as far as I can see. Those charges are not deducted from the performance.
Brendan

Not explicitly, but BCP are only using 95.7% of your money to provide the benefits they outline.

The question I would have concerns the stock choice. They don't say why they have picked those stocks, and there are some very unfamiliar names in there. It's unclear what brings these particular 24 stocks together. If these stocks, for example, have unusually high dividend yields then, BCP are benefiting from that high dividend to fund the benefits. A high dividend also should reduce the share price, as the remaining value of a company reduces by the amount of the dividend paid out, and hence it makes the share performance target all the more difficult.