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10-year term structured product sees first 3-year returns and issues 26th tranche

23 January 2019

Mariana and Lowes Financial Management have issued the 26th tranche of the Mariana 10:10 Plan, a co-operation between the two companies.

The first of the plans launched in 2015 and were the first to extend the maximum possible term of an autocall (or kick-out) investment beyond the then typical six years to 10 years.

Pushing out the term of the plans increased the number of potential opportunities for positive returns to be achieved and deferred the ultimate, potential capital loss determination point.

In depressed markets this provides a longer opportunity to achieve gains, while concurrently reducing the risk of losses.

Lowes reports that in the fourth quarter of 2018 all eight options of the first three tranches of the 10:10 Plan matured at their first opportunity returning, on average 8.75% per annum over their three-year holding periods, when the FTSE 100 Index averaged just 3.45% pa.

For the latest issue, on the second anniversary, the first Option will mature if the FTSE 100 is at or above 102.5% of the Initial Index Level (the closing level of the FTSE 100 recorded on 22 February 2019) , the second Option will mature if the FTSE 100 is at or above 100% and the third and final Option will mature if the FTSE 100 is at or above 105% of the Initial Index Level. Option 1 will pay 9.44% for each year the plan runs, Option 2 and Option 3 will pay 12.28% and 14.51%, respectively.

Where maturity is not triggered on the second anniversary, the investment runs until the next and subsequent anniversaries (up to ten years) when a similar maturity test is done, albeit with the maturity threshold for Option 1 decreasing by 2.5% per year.  Only in long-term, depressed markets that see the FTSE 100 lose 30% of its value over ten years will the investment terminate with a loss.

The latest tranche of the Mariana 10:10 Plan has Goldman Sachs International as the counterparty.

Ian Lowes, managing director at Lowes Financial Management (pictured), said that by extending the maximum duration from six years to 10 years, the plans allow investors to ride the peaks and troughs of the stock market.

“ “Structured products have been quietly flying under the radar for many years now, making considerable steady gains and benefiting investors and their advisers.

“Given where markets are in terms of volatility, defined return investments such as the Mariana 10:10 Plan are exactly the types of products that investors should be looking at.”

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