Colin Mclachlan - 17/04/2019
On 15th April 2019, all six options of the fifth issue of the Mariana Capital 10:10 Plan matured, maintaining the 100% record, where every option, of every issue has matured at first opportunity. The plans all had a maximum ten-year term, which clearly hasn’t proven to be close to necessary to date but is still a very much ‘nice to have’ and will be for as long as stock market movements aren’t predictable with any certainty.
Unlike the first four issues, the April 2016 issue offered three options utilising solely the FTSE 100 Index as the underlying measure and a further three options utilising the FTSE 100 and Euro Stoxx 50 indices combined, thus catering for investors with different risk appetites.
The options incorporated a defensive version that would still mature on an early maturity date even if the respective indices had fallen by up to 10%, the at the money option required the indices to be at or above the initial levels and the more adventurous option needed both indices to be 10% higher.
As it was, on the first potential early maturity trigger date the FTSE 100 was up by 17.23% and the Euro Stoxx 50 up by 22.25% so the six options matured producing the following returns:
|Plan||Total Return||Annualised Return
|10:10 Plan April 2016 (Option 1)||23.40%||7.26%|
|10:10 Plan April 2016 (Option 2)||30.00%||9.14%|
|10:10 Plan April 2016 (Option 3)||37.80%||11.28%|
|Dual Index 10:10 Plan April 2016 (Option 1)||28.05%||8.59%|
|Dual Index 10:10 Plan April 2016 (Option 2)||36.15%||10.83%|
|Dual Index 10:10 Plan April 2016 (Option 3)||45.75%||13.38%|
Structured products have often been seen as a way to help mitigate market risk within a portfolio thanks to the element of capital protection they offer. All options of the Mariana Capital 10:10 Plan aim to protect investors’ capital from adverse market conditions, to the extent that, subject to counterparty bank solvency, a full return of capital would be achieved even if the early maturity parameters were not met on every anniversary up the end of ten years and the relevant indices were at least 70% of the initial levels at that point. Otherwise the returns would track the fall in the index over the ten years.
The current issue of the 10:10 Plan, which uses Citigroup Global Markets (A+ by Standard and Poor’s) as counterparty offers three options. Option 1 is offering a return of 8.2%, providing the FTSE 100 Index closes at or above 102.5% of the initial index level (recorded on 10th May 2019) on the second anniversary, or subsequently at or above a reducing reference level thereafter, which ends at 82.5% on the tenth observation. Option 2 which requires the FTSE 100 Index to be at or above the Initial Index Level is offering a return of 10.8% and Option 3 which requires the FTSE 100 Index to be at or above 105% of its Initial Index Level to trigger a return is offering 12.8%.
The 10:10 Plan is a market innovation introduced by us here at Lowes Financial Management in cooperation with Mariana Capital. Another structured investment solution that we have brought to the market is the Lowes UK Defined Strategy Fund which draws upon all of our expertise in this sector and is effectively a basket of many such investments, diversified across a range of counterparties and market observation dates. It’s a great opportunity for investors to benefit from the returns generated by structured investments but within a fund structure, which provides daily liquidity and is more tax efficient. Details of every trade are published on UKDSF.com where you sign up to be notified whenever there is a portfolio event such as when a new trade is added. The Lowes UK Defined Strategy Fund is now available on a range of investment platforms including Aegon, Zurich and OMW Wealth.
Details and literature for the latest 10:10 Plans can be found at www.CompareStructuredProducts.com/Products
Details and literature for the Lowes UK Defined Strategy Fund can be found at www.UKDSF.com
Disclosure of interests: Lowes has provided input into the concept, development, promotion and distribution of the 10:10 and is investment manager for Lowes UK Defined Strategy Fund. Lowes has a commercial interest in these investments as a result of its involvement. Where Lowes is involved in advice on these investments to retail clients, it will not receive benefit of any fees for its involvement, other than those fees payable by the client to Lowes. Lowes has robust systems and controls in place to ensure that it manages any actual or potential conflicts of interests in its activities.