Structured Product Review | Structured Product List
With three-and-a-half months to go until the maturity date, we reviewed the product and based on the surrender price, if we instructed clients to. The origins of structured products date back to the early s and the birth of . allowing comparison of the relative risk/ rewards alongside other forms of .. In the UK retail market the majority of structured products have traditionally been. Pay just % per investment on Investec structured products. Browse investment Closing Date: Jan 16, ; ISA Transfer: Dec 21, Don't forget the.
The Plan aims to provide fixed income payments of 0. The Plan is designed to repay your initial deposit and to make annual income payments of 3.
The Plan is designed to repay your initial deposit and to make monthly income payments of 0.
Full return of initial deposit at maturity regardless of EVEN 30 performance. Investec PLC, which houses the non-South African operations, and Investec Limited, which houses the Southern African operations, form a single economic enterprise where shareholders have common economic and voting interests. It is identifying those risks, understanding how they may affect an investment and assessing whether an investment is suitable for your circumstances that is important.
The potential returns of most structured products and repaying the money invested are usually linked to the level of a stock market index and also depend on the financial stability of the issuer and counterparty bank. You should only consider investing if you understand and accept the risk of losing some or all of any money invested. Structured products should only be considered as part of a diversified and balanced portfolio.
Below is a summary of some of the main risks usually associated with an investment in structured products plans: Market risk to potential returns Whether or not a plan generates the potential returns for investors usually depends on the closing level of the relevant index on the relevant dates for the plan, i. If the index closes below the level needed, for the plan or plan options chosen, on all of the relevant dates, the plan or plan options will not generate a return.
Market risk to repayment of money invested in 'Capital-at-Risk' plans If the closing level of the relevant index is below the level needed on all of the kick-out anniversary dates or early maturity dates, if relevant for the plan or plan options chosen, and on the end date, repaying the money invested at maturity will usually depend on the closing level of the index on the end date. Different structured products use different types of protection barriers.
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Some products use barriers that are observed every day that can therefore be breached on any day during the investment term, while some products use barriers that are only observed at the end of the investment term and that cannot therefore be breached during the investment term. For example, the Investec Deposit Growth Plan 24 is a five-year product that will pay up to 1.
But how does Investec decide to offer 1. In order to work out what rates they will pay out, issuers calculate the probability of the underlying asset rising or falling using statistical analysis.
And this, say critics, is why retail investors will fall at the first hurdle. How can they compete with computer programs to work out these probabilities? Nev Godley of Morgan Stanley, who has 10 per cent of his personal portfolio invested in structured products, claims the charge of complexity is unfair.
If you are happy with the counterparty risk and the market risk then these are more straightforward than lots of other products. Plus they have predefined returns, so there is little scope for human error to miss targets.
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At any one time investors will find about 50 individual structured products on offer. The products can be divided into three main types: These are all priced differently, taxed in different ways and pose different risks and rewards to the investor. Buying a security allows the issuer to pay back the money originally invested when the plan matures.
The security in question may well be a zero-coupon bond, which is sold at a discount to its redemption value and provides the required amount at maturity, but no income along the way.
The remaining money is used to buy derivatives — such as call and put options — which give exposure to the underlying asset and provide the pay-off to investors.
The less capital protection offered in the structured product, and the higher the potential payout, the more money will be invested in derivatives — which give exposure to the performance of the asset such as the FTSE without buying the actual asset. Are structured products a sensible way to manage risk — or simply a distraction? The returns will depend on the option that can be purchased for that amount.
If the index rises over the term, the investor will receive the return on the call option — which is often leveraged — plus the proceeds of the bond. If it falls, the call option will expire worthless, but the investor will receive his or her money back.
Put options, which confer the right to sell at a predetermined price, can be used to increase the potential return, but will add a degree of risk. But if the put option kicks in, then you may lose money. Adrian Neave at Gilliat Financial Solutions says that while it is useful for investors to know the ins and outs of structured products they should also be clear, and reassured, about what is held in their name.
Structured products maturing now should have hit their targets because stock markets are up over three, five and six years. But with markets now at or near record highs and interest rates low, prices are looking less attractive.
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As a rough guide to returns, Lowes Financial Management, a financial adviser, says that a five-year structured deposit might pay out 27 per cent if the FTSE is up at the maturity date.
A capital-protected structured investment might pay 35 per cent if the FTSE rises over five years, and a capital at risk structured investment might pay 52 per cent if the market is up, but investors risk losing some of their capital if the market falls.
Gains from structured deposits are taxed as income and they can be included in cash Isas, while profits from structured investments incur capital gains tax. They can be held in stocks and shares Isas and in Sipps. Providers say that in light of current markets they are seeing a boom in sales of defensive structured products, which offer a positive return even if markets fall, such as the Morgan Stanley FTSE Defensive Bonus Plan 10, which will pay 8.
Early redemption outside the terms of the investment may mean the returns are less than you invested There is a secondary market for products, but it remains small. Structured products While some structured products have undoubtedly produced returns that have disappointed investors, to criticise and dismiss the whole sector is potentially to miss out on some very interesting investments, writes Thomas Hughes.
Whenever we recommend an investment to a client, it is because we would be prepared to invest in it ourselves and often do. The structured products in my portfolio sit alongside a broadly diversified portfolio of unit trusts and other investments and in the main have helped to produce a very attractive overall return.