No one will easily
forget the turbulent times that 2008 and the early part of 2009 brought with
them. Bubble after bubble burst; house prices hit rock-bottom; formerly
‘stable’ companies crumbled into insolvency by the ‘bucket-load’. The markets
truly suffered a crisis that has been seared into the minds of financial
professionals.
How can, then,
individuals and institutions alike, now invest confidently into financial
products?
How can they make
asset allocation decisions beyond simply saying: ‘100% of my portfolio into
Cash’ while still keeping the peace of mind that their initial capital will be
preserved?
Simple.
Structured Products.
A Structured Product
or Note is an investment vehicle that can be written or ‘structured’ in many ways,
according to investors specifications; all range of asset classes, maturity
dates, risk / return levels, liquidity, and even prices can be accommodated
for!
Benefits:
-
Capital
Protection
o
They can
be written to guarantee to return 100% of your initial investment
-
Auto-Call
Potential
o
They can
be written so that, once certain criteria have been met, the note is redeemed
and the growth is realised
As a reference, an
example is described below. It is a note that significantly reduces the risk by
giving up some potential return. It invests into 4 soft commodities; Corn,
Sugar, Cotton and Soybeans.
-
100%
capital protection, potential annual return of 10% per annum
o
Regardless of the performance, you will receive
100% of your initial investment, but you can ‘only’ receive 10% per year
-
3 years
maturity
o
The note will ‘mature’ or finish in 3 years, in
which case you will either receive your initial investment, or the growth up to
10% / annum, whichever is higher
This is a great
example of how investors can invest safely into an ‘interesting’ asset class,
with only a medium term commitment for tying up their money!
New notes are being
written weekly, so for an updated list or for more information, just contact
the Portfolio Team at Montpelier.
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