INVESTORS have poured billions into tracker bonds in recent years. Yet while returns on deposits and share returns are widely known, tracker bond returns of recent years have remained about as public as their charges.

Now we know why. Out of 27 First Active offerings that matured between December 2003 and August 2006, only two had a positive return, the Sunday Tribune reveals today.

One of these earned 10% over six years because that was guaranteed as a built-in feature of the bond. The other barely broke into the black with a total of just 1.96% to show after six years.

Three lost 10% and 22 produced zero returns, though they did return the capital invested.

The data we publish today could be seen as "dynamite" by Eddie Hobbs and a "damning indictment of tracker bonds", according to adviser Liam Ferguson, of Ferguson & Associates.

However, a spokesperson for First Active denied this, stressing that, before and after the period in question, First Active tracker bonds did well. Current performance can be monitored on www. firstactive. ie.

"The first bond that returned capital only to customers matured (after four years) on 1 July 2002. Over exactly the same time period the Iseq was down (-10.3%) and the FTSE 100 down (-20.8%), " she said.

However, the period we highlight covers eight years and Eddie Hobbs questions how these trackers could have performed so badly over such a long period that included strong bull and bear markets.

The data offers a rare insight into a product that has stirred controversy as returns in recent years failed to match expectations heightened by hard-sell tactics.

Trackers come under fire as much for their design as for the way they are sold - as sexy, share-type investments to novice investors.

Almost all the investor's money goes into an ordinary deposit account, with the rest going to pay for an option, which is a kind of a bet on the stock market.

This does usually ensure that 100% of your money is safe. And some trackers provide a small guaranteed minimum return.

"These used to be a reasonable bet provided you were happy with the minimum and a small possibility of getting a better return, " said Ferguson. "The only tracker bonds I ever sold were in June 2002 with New Ireland and these are maturing in June of this year. They're doing OK but they had a guaranteed return of 16% at maturity anyway, " he says.

However, many naive investors don't realise that getting just your money back after six years represents a substantial loss - not to mention the lost opportunity of earning better returns elsewhere. Nor do they appreciate that they miss out on dividends, which make up a large part of share growth.

"You cannot compare tracker bonds with managed funds as these have no guarantees in place, " said the First Active spokesperson said.

That's true. And investors should be aware that they cannot have their cake and eat it. If they want a capital guarantee it is going to cost them in lower potential returns.

And the fancy financial engineering that goes into making such a product failsafe doesn't come cheap.

But bearing this in mind, we can examine how much that 100% capital guarantee costs in terms of lost performance by comparing some of the recently maturing tracker bonds to deposits and managed funds.

We selected six of the 27 tracker bonds on which we have detailed data. These are spread over the period in question and are compared in our table to average managed funds returns.

Every penny invested in the 27 products we documented would have been better off in a deposit account. So it's no surprise that these six follow suit.

Many of those steered towards trackers by bank staff would normally have gone into deposits and earned a return of up to 27.5%.

In only one of the six cases we looked at did managed funds do worse - the three years to December 2003 when the average managed fund lost 15.76%. In that case, tracker investors were much better off with zilch returns but with their capital safe and sound.

However, in subsequent years, the bear market turned bullish and by 2006 managed funds were returning 28.84%.

Yet still tracker investors were getting zero returns.

"They should never really have been sold as a viable way of delivering returns linked to the stock-market, " said Liam Ferguson. "Participation rates [limiting your share of growth] and caps on return meant that nobody was ever going to get a stock-marketlinked return in a rising market. "They should always have been seen as just one step up the risk ladder from deposit accounts.

Nowadays, the low guaranteed minimum rates of return being offered in today's crop of tracker bonds leave them looking like very poor value. Throw in the lack of access to funds and the fact that typical tracker bonds don't take account of dividend income on the shares they're allegedly tracking and they just don't have a lot going for them, " he said.

Ferguson recommended that an investor with a low appetite for risk is likely to get a better return from a cautiously-managed fund, with no guarantee, that invests in real assets - that is, the fund actually buys shares, bonds and/or property rather than the derivatives that tracker bonds generally buy into.

There are also managed funds out there with capital guarantees after a set period, but still investing in real assets and re-investing dividend income into the fund.

"You still have access to the funds if necessary, albeit at the loss of the guarantee if you cash in before the guarantee date. The guarantee comes at the cost of a higher annual management charge, " he said.