The Pitfalls of Precipice Bonds

For many individuals, the world of investment can be a mystery. One investment that has caused major confusion recently has been the so called “precipice bond”.These investments have been marketed under a variety of different names. One of the characteristics of a “precipice bond” is that, whilst it generates a fixed income, the return of capital is linked by a formula to the performance of an index or indices. If the performance of those indices is outside a set threshold, the investor can lose a substantial part of his investment. In other words, while the income is paid, the capital falls off a cliff; hence a “precipice bond”.

The mis-selling of precipice bonds is a hot topic in the financial services world at present. Many investors never understood the risks and lost significant amounts of capital as a result.Thankfully, there is recourse available to investors who have been mis-sold these products, by way of legal action against the financial advisor or against the party who provided the bond. If you would like to discuss this issue, please contact:

Adam Epstein
Tel +44 (0)20 7440 7102
adam.epstein@mishcon.co.uk