First UK 10-year retail structured product matures with 37.5% gain after 3 years
28 October 2018
Extended-term product increased opportunity for positive results, repositioned risk and changed typical product design.
The Mariana 10:10 Twin Option FTSE Kick-Out Plan, the first structured product launched with a 10-year term, has matured after three years with gains of 30% and 37.5% for Options 1 and 2 of the product respectively.
Launched in October 2015, the Plan was a joint initiative between Mariana Capital and Lowes Financial Management and extended the typical 6-year autocall/kick-out product to one with a maximum possible duration of 10 years.
A longer time frame provided for more opportunities for the product to mature with a positive outcome for clients. It also repositioned the market risk, as in the event of a significant market downturn, the investment had a greater chance of ultimately maturing with positive gains than its six-year term counterparts.
The counterparty to the first issue of the Mariana Plan was Société Générale. Option 1 offered a potential return of 10% per year held, maturing on the first anniversary, from the third year onwards that the FTSE 100 Index closed at or above the level recorded at the beginning of the term (6378.04). Option 2 offered a higher 12.5% for each year held, as it required the FTSE 100 to close 10% above the starting level on any anniversary from the third year onwards.
The Mariana/Lowes plans are now on their 24thissue in three years and Lowes has also co-operated with Investec Structured Products, launching the Investec/Lowes 8:8 Plan – products with a maximum duration of 8 years, with current issue offering 8% return for every year held – with the potential to mature every 6 months from year two onwards.
Ian Lowes, managing director of Lowes Financial Management (pictured), says: “Obviously, anyone investing in a stockmarket linked investment is hoping that the market will rise and these investments are designed to generate attractive, pre-determined gains if that occurs.
“But as anyone knows, stockmarkets do not rise in straight lines. The longer duration autocalls offer the potential for a snowballing coupon to accumulate in periods of prolonged market stress and allow an extended period of time for market recovery.”
Lowes points out that both the 10:10 & 8:8 Plans carry risk of potential loss where severe, long-term market conditions occur or there is a counterparty bank failure.
He adds: “Lowes co-operations of this nature have now been utilised by hundreds of advisers nationwide. Also, since their introduction, the wider market has adopted this innovation. A quick look at Lowes’ comparison and educational website StructuredProductReview.com, shows that autocall products with maximum term of 7, 8 and ten years are now commonplace.”
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