10:10 - One year on
CompareStructuredProducts.com - 14/09/2016
In September 2015 Lowes Financial Management introduced the ground-breaking 10:10 Plan from Mariana Capital. Now 12 months on, the ninth issue of the 10:10 Plan has been launched. The new tranche offers investors the potential to achieve 7%, 9.1% or 11.55% (Not compounded) for each year held.
In the last year we have seen the previous issues of the 10:10 Plan evolve with the interests of investors being the main focus. The most compelling change has to be that of the counterparties, initially a one counterparty plan, the Mariana 10:10 Plan has since become a collateralised proposition, diversifying the credit risk across four major financial institutions.
Originally the sole counterparty was Société Générale and whilst still the counterparty, the risk of catastrophic loss arising from the banks failure is mitigated by transferring the credit risk to other institutions which, for the latest issue are Macquarie Bank, Santander UK plc, Standard Chartered Bank and Lloyds Bank plc all of which are rated ‘A’ by Standard & Poors.
The 10:10 Plan series was designed to combine the benefits of short term annual kick-out potential, from the 3rd anniversary, with coupons snowballing for each year the Plan runs and with a longer
maximum investment term, which fundamentally increases the number of anniversary opportunities to successfully generate positive kick-out returns during the term. Whilst also repositioning investor exposure to market risk, through the ‘end-of-term’ protection barrier.
There are 3 options to choose from / diversify across, with the following annual kick-out returns potential.
Option (1) 7%
If the FTSE 100 Index is at or above 90% of its start level after 3 years, the Plan matures returning the full original capital plus 7% for each year, i.e. 21%. If the Index is below its start level after 3 years, the Plan continues and at each anniversary the same condition applies, with 7% added for each extra year, i.e. 28% at the 4th anniversary, 35% at the fifth, and so on, until the tenth anniversary, when the maximum return would potentially be 70%.
Option (2) 9.1%
If the FTSE 100 Index is at or above 100% of its start level after 3 years, the Plan matures returning the full original capital plus 9.1% for each year, i.e. 27.3%. If the Index is below 100% of its start level after 3 years, the Plan continues and at each anniversary the same condition applies, with 9.1% added for each extra year, i.e. 36.4% at the 4th anniversary, 45.5% at the fifth, and so on, until the tenth anniversary, when the maximum return would potentially be 91%.
Option (3) 11.55%
If the FTSE 100 Index is at or above 110% of its start level after 3 years, the Plan matures returning the full original capital plus 11.55% for each year, i.e. 34.65%. If the Index is below 110% of its start level after 3 years, the Plan continues and at each anniversary the same condition applies, with 11.55% added for each extra year, i.e. 46.20% at the 4th anniversary, 57.75% at the fifth, and so on, until the tenth anniversary, when the maximum return would potentially 115.5%.
With all three options, if early maturity is not triggered and the FTSE 100 Index is still below the required levels at the end of the investment term, the Plan will mature returning original capital in full, unless the Index has fallen by more than 30%, at maturity - the Plan ignores the downside of the market throughout the investment term, highlighting one of the significant advantages of longer term strategy.
The Plan puts ‘capital-at-risk’: If the Index is 30% or more lower than the start level at the end of the ten years, capital will be lost in line with the fall in the Index, on a 1-for-1 basis. Therefore, if the Plan has not matured on a previous anniversary and if, after 10 years, the index is 35% lower than its start level, then 35% of the original capital investment will be lost.
As a capital-at-risk product, it is only suitable for investors who can understand and accept the risks involved.
However, the maximum 10 year term helps counter one of the criticisms of structured investments, that shorter fixed term products may potentially crystallise losses in market downturns when some would prefer to stay invested for the longer term, in anticipation of markets recovering to more normal levels and generating positive returns.
It must be appreciated that in the event of Société Générale’s failure an enforced early maturity will occur and the collateralised surrender value could be less than the amount invested. However, a catastrophic loss is unlikely in this event because the counterparty risk has effectively been transferred to the four financial institutions named earlier.
Twenty-five per-cent of the investment is exposed to each institution but should any of the four financial institutions fail to meet their wider financial obligations, that proportion of the investment could be lost.
We believe the Mariana 10:10 Plan is one of the most attractive structured products available in the market today. If you feel this Plan is of interest, then please download the product literature and application form by clicking here
which also includes our comprehensive Summary Paper, outlining potential scenarios in both bull and bear markets.
Lowes has provided input into the concept, development, promotion and distribution of this Plan. The provider’s charges/fees are built into the terms of the investment - Lowes has a commercial interest in the Plan as a result of its involvement in its development and promotion. All Plan returns are stated after allowing for the provider’s charges/fees. Where Lowes is involved in advice on or the intermediation of this investment to retail clients, it will not be paid any fee from Mariana for its input into the Plan. Lowes has robust systems and controls in place to ensure that it manages any actual or potential conflicts of interests in its activities.
This article should not be construed as advice or a recommendation to invest. An investor should not rely upon our opinion but should conduct their own analysis or utilise an adviser. All investments involve risk and you could lose some or all of the money you invest. It is imperative you read the Plan brochure and terms and conditions and understand all of the risks prior to proceeding. If you do not fully understand the risks, the commitment or are unsure as to the suitability of the investment for you, you should not proceed but instead contact us. Our advisers will be happy to help advise on the correct product for your portfolio. Alternatively, if you require more information on any of the products discussed you can contact us on 0191 2818811.