Lowes Financial Management’s CompareStructuredProducts.com have collated the maturity data of structured products maturing within the first six months of 2017. We have witnessed 353 products mature, the results of which, yet again, speak for themselves. With over 63% of maturing products linked solely to the FTSE 100 Index, it’s not surprising that results have been positive.
93.77% of all products maturing in the first half of 2017 generated positive returns for investors, with 3.68% returning investors’ capital in full but with no gain and the remaining 2.55% returning a loss (9 products).
Once again, all products utilising solely the FTSE 100 Index as the underlying measurement (224) generated positive returns for investors.
The best performing maturity, which at the time of launch was granted ‘Preferred’ status on CompareStructuredProducts.com was the Mariana Capital FTSE 3 Stock Dual Option Kick Out Plan – Option 2. This plan was designed to mature early, providing GlaxoSmithKline Plc, Vodafone Group Plc and Barclays Plc all closed (on the relevant observation date) at, or above their Initial Share Prices. The plan was structured to provide investors with a 15% gain for each six month period the plan was in force. The plan matured early, on its fourth observation after 30 months, providing investors with a gain of 75%.
Another plan granted ‘Preferred’ status at launch by CompareStructuredProducts.com was the best performing FTSE 100-only linked maturity which was the Investec FTSE 100 Accelerated Growth Plan 33, which offered investors the potential for growth at maturity equivalent to 2.5 times any rise in the FTSE 100 Index. The plan struck on the 11th June 2012 recording an Initial Index Level of 5432.40 and closed on 16 June 2017 recording a Final Index Level of 7304.19 (averaged over the final six months). A rise in the underlying of 34.46%, resulting in a gain for investors of 86.14%.
If we look at the sector maturities as a whole, which consist of deposit based, capital ‘protected’ and capital-at-risk products, the average annualised return was 6.79% over an average term of 3.63 years.
A further breakdown of the data reveals that the 60 capital ‘protected’ and deposit based products to mature in the first six months of 2017, returned, on average, 3.14% per annum over 5.34 years, whereas the average return of the 293 capital-at-risk products was 7.53% over an average term of 3.28 years.
While the capital-at-risk products collectively produced an average annualised return of 7.53% the trade-off of risk verses reward is more apparent if we look at the best and worst 25% of products. The top 25% average annualised return for FTSE only linked products was 9.89% per annum compared to an average of 13.38% per annum for plans linked to alternative measures such as multiple indices or baskets of shares. The worst 25% of products linked to the FTSE 100 Index produced an average annualised return of 5.59% but this figure for products linked to other measures was -0.14%.
We have also analysed the performance of the ‘Preferred’ products to see how well we have been doing at identifying those that we think are better and as such, those that Lowes would potentially utilise in the course of our day-to-day activity as Independent Financial Advisors. Of the 353 product maturities 102 were assigned ‘Preferred’ status at the time of launch. These products were predominately capital-at-risk products and 66% of these were linked solely to the FTSE 100 Index. The average annualised return of the Lowes ‘Preferred’ products was 8.66% over an average term of 3.34 years. The top quartile returned 11.98% per annum whereas, the bottom quartile returned 5.64% per annum.
Now we must note that as with any investment sector there will be detractors and on this occasion 3% of all products lost capital. None of these were ‘Preferred’ by Lowes / CompareStructuredProducts.com.
The biggest loss was posted by the Meteor Top Ten Kick-Out Plan 6 which was undoubtedly a lot riskier due to the number of shares it contained as underlying measurements. BHP Billiton was the main detractor to the plan, finishing the term 53.46% down over the term. As a result of the decline, the share had breached the capital protection barrier of 50% at the end on the investment. The end result for investors was a capital loss on a 1:1 basis (53.46% capital loss).
Whilst such share-linked products are now rare, there continues to be a broad range of product offerings to appeal to a wide range of investors as part of a diversified portfolio. CompareStructuredProducts.com publishes details of all such products and facilitates investment as such. Those who have any doubts about the suitability of any investment for them should contact an appropriately experienced and qualified Independent Financial Adviser.