CompareStructuredProducts.com - 29/01/2020
The final month of 2019 witnessed a landslide victory for Boris Johnson’s Conservative party in the fourth general election of the decade. Despite this election causing nationwide division and antagonism, UK investors have since become united in a post-election-bull-market-jamboree.
Dubbed as ‘Boris bounce’ in retrospect, UK equity markets have enjoyed a significant bull run since the twelfth of December 2019, with the FTSE 100 Index having risen by 4.8% and the FTSE 250 Index by 4.63% 1.
As a direct result of ‘Boris bounce’, December performed better than originally foreseen in terms of structured product maturities in the UK retail sector. 47 products matured across the month, including 21 FTSE 100 Index linked plans that matured following the election 2. Some of these needed the index to rise above 7,400, others above 7,590. At the beginning of December, with any party’s election success anything but certain, the FTSE 100 stood at 7285.94 and several of December’s possible maturities certainly looked like they would remain invested for another year.
As it was, the ‘Boris bounce’ proved just enough… really, just enough! By the 16th December the FTSE 100 was less than 1% above where it was two and a half years earlier and by close of business on 23 December it was less than half a percent above where it was two years earlier. But being any percentage point higher at these points was all that was needed, and so multiple maturities were triggered.
Admittedly, these individual maturities in December would not have been triggered without the post-election rally, but it is worth noting that without it, these plans would still have many years in which to ultimately mature with increased gains and many had annually decreasing maturity trigger levels.
Whilst many of December’s maturities occurred on their first opportunity, we have long held the belief that a longer maximum investment term offers a valuable but hopefully unnecessary safety net for investors. This was a significant consideration when co-creating the Mariana Capital 10:10 Plans, with their maximum ten-year investment terms. With an extended maximum term, investors have more opportunity to ride out sustained bear markets or enjoy delayed market rallies later in the plan’s term, if earlier autocall opportunities were missed.
The latest tranche of the 10:10 plans (February 2020) offers the potential to mature from the second anniversary onwards should the FTSE 100 Index be above specific reference levels on any annual observation date, whilst maintaining a maximum ten-year investment term should it be required. All three options are summarised below…
1. Option 1 will mature with a gain of 8.1% for every year that the plan has been in force, providing the FTSE 100 Index is at or a above a reducing reference level on any given observation date. The reference level for year two is 102.5% and reduces by 2.5% on each subsequent anniversary, to 82.5% on the tenth.
2. Option 2 will mature with a gain of 10.9% for every year the plan has been in force, providing the FTSE 100 Index is at or above its’ initial index level on any given observation date.
3. Option 3 will mature with a gain of 13.25% for every year the plan has been in force, providing the FTSE 100 Index is at or above 105% of its’ initial index level on any given observation date.
Goldman Sachs International (S&P: A+, Fitch: A, Moody’s: A1) is the counterparty for the Mariana Capital 10:10 Plan February 2020.1. Source: Yahoo Finance. 12/12/2019 - 14/01/2020. 2. Source: CompareStructuredProducts.com. Structured investments put capital at risk. Past performance is not a guide to the future. Disclosure of Lowes interests: Lowes has provided input into the concept, development, promotion and distribution of the Mariana Capital 10:10 Plans. 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 these charges/fees. Where Lowes is involved in advice on or the intermediation of this investment to retail clients, it will not receive any payment from Mariana for its input. The aim of developing plans in co-operation with providers, with Lowes input, is that they should be amongst the best available in the market - and, as such, be granted 'Preferred' status, on their merits. Lowes has robust systems and controls in place to ensure that it manages any actual or potential conflicts of interests in its activities.