Guide to Backtesting Investment Plans March 2019

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1 15th Europe Structured Products & Derivatives Awards 218 Best Distributor, UK & Ireland For financial adviser use only. Not to be used with retail clients. Guide to Backtesting Investment Plans March 219 SRP AWARDS Investec

2 Backtesting Backtesting can be a useful tool for advisers in order to evaluate the performance of a structured product in various market scenarios. Backtesting should be used as one of a suite of tools when choosing a suitable product for a client. The information provided in this factsheet is intended to demonstrate how our Structured Products would have performed historically, had they been available for investment. Particular emphasis has been placed on the scenarios in which clients would have either lost capital or received no return on their investment. In order to simulate past performance, our Structured Products have been tested as if they had started on every trading day between the start date of the underlying index (or latest starting date if there are multiple indices) and the final test date for each Plan., backtesting a 6 year Plan linked to the FTSE 1 constitutes 7,353 individual tests. It is important to bear in mind that the information contained within this factsheet is in no way an indication of future returns. This factsheet is an analysis of the following Investment Plans: Income FTSE 1 Defensive Income Plan Defensive FTSE 1 Defensive Step Down Kick-Out Plan Investec/Lowes 8:8 Plan FTSE 1 Step Down Kick-Out Plan Growth FTSE 1 Enhanced Kick-Out Plan Additional support tools For more information on our Plans, please visit our website: or call us on

3 INVESTMENT PLANS INCOME FTSE 1 Defensive Income Plan This product has a term of 8 years and pays quarterly income payments, provided that the FTSE 1 is greater than 6% (option 1) or 8% (option 2) of its starting level. This product can also mature early at the end of any year from the second anniversary onwards if the FTSE 1 is greater than 15% of its starting level. In the event of an early maturity, the product will mature at that point and any future income payments will cease. Capital is at risk if the product runs to the final maturity date and the FTSE 1 is below 6% of its starting level. The table below shows the number of occasions on which this product would have matured at each potential maturity date. Where the product would have reached final maturity, the table shows how many times an investor would have experienced either a return of capital or a capital loss. The table also shows the average number of income payments made at each maturity point for each Plan option. Average number of income payments* Maximum possible number of income payments Option 1 (6% income trigger) Option 2 (8% income trigger) Early Maturity in Year % Early Maturity in Year % Early Maturity in Year % Early Maturity in Year % Early Maturity in Year % Early Maturity in Year % Final Maturity capital return % Final Maturity capital loss 3.4% Total number of tests 685 *Rounded to 1 decimal point Both options The chart below shows the start date of any instances where investment in either option of the FTSE 1 Defensive Income Plan would have resulted in capital loss at Final Maturity: FTSE 1 Index Starting Level Mar 21 3 instances of capital loss FTSE 1 Index Source of Index Data: Bloomberg. First test start date: 3 January Final test start date: 4 February 211 3

4 INVESTMENT PLANS DEFENSIVE FTSE 1 Defensive Step Down Kick-Out Plan This product has a maximum term of 6 years, with the potential for maturity after years 2-6 with a positive return if the FTSE 1 Index is greater than a Kick-Out level that reduces each year. The Kick-Out level is a percentage of the starting level of the FTSE 1 Index: 1% in Year 2, 95% in Year 3, 85% in Year 4, 75% in Year 5 and 65% in Year 6. Capital is at risk if the product runs to the final maturity date and the FTSE 1 Index is below 6% of its starting level. The table below shows the number of occasions on which this product would have matured at each potential maturity date. Where the product would have reached final maturity, the table shows how many times an investor would have experienced either a positive return, a return of capital with no additional return or a capital loss. Early Maturity in Year % Early Maturity in Year % Early Maturity in Year % Early Maturity in Year % Final Maturity positive return % Final Maturity capital loss.% Final Maturity return of capital only.% Total number of tests 7353 Since our backtesting has indicated that investment in the FTSE 1 Defensive Step Down Kick-Out Plan would have resulted in no instances of capital loss or return of capital only in the past, we have only included a graph on this page to indicate the Final Test. However, please bear in mind that past performance is not a guide to future performance FTSE 1 Index Source of FTSE 1 Index Data: Bloomberg. First test start date: 3 January Final test start date: 4 February 213 4

5 INVESTMENT PLANS DEFENSIVE Investec/Lowes 8:8 Plan This product has a maximum term of 8 years, with the potential for maturity every 6 months after years 2-8 with a positive return if the FTSE 1 Index is equal to or greater than a pre-defined Kick-Out level. The Kick-Out level is a percentage of the starting level of the FTSE 1 Index: 92% in Years 2-8. Capital will be reduced if the product runs to the final maturity date and if the FTSE 1 Index is below 6% of its starting level. The table below shows the number of occasions on which this product would have matured at each potential maturity date. Where the product would have reached final maturity, the table shows how many times an investor would have experienced either a positive return, a return of capital with no additional return or a capital loss. Early Maturity in Year % Early Maturity in Year % Early Maturity in Year % Early Maturity in Year % Early Maturity in Year % Early Maturity in Year % Early Maturity in Year % Early Maturity in Year % Early Maturity in Year % Early Maturity in Year % Early Maturity in Year % Early Maturity in Year % Final Maturity positive return.% Final Maturity capital loss.% Final Maturity return of capital only.% Total number of tests 6827 Since our backtesting has indicated that investment in the Investec/Lowes 8:8 Plan would have resulted in no instances of capital loss in the past, we have only included a graph on this page to indicate the Final Test. However, please bear in mind that past performance is not a guide to future performance FTSE 1 Index Source of FTSE 1 Index Data: Bloomberg. First test start date: 3 January Final test start date: 4 February 211 5

6 INVESTMENT PLANS DEFENSIVE FTSE 1 Step Down Kick-Out Plan This product has a maximum term of 6 years, with the potential for maturity after years 2-6 with a positive return if the FTSE 1 Index is greater than a Kick-Out level that reduces each year. The Kick-Out level is a percentage of the starting level of the FTSE 1 Index: 1% in Year 2, 95% in Year 3, 9% in Year 4, 85% in Year 5 and 8% in Year 6. Capital will be reduced if the product runs to the final maturity date and the FTSE 1 Index is below 6% of its starting level. The table below shows the number of occasions on which this product would have matured at each potential maturity date. Where the product would have reached final maturity, the table shows how many times an investor would have experienced either a positive return, a return of capital with no additional return or a capital loss. Early Maturity in Year % Early Maturity in Year % Early Maturity in Year % Early Maturity in Year % Final Maturity positive return % Final Maturity capital loss.% Final Maturity return of capital only % Total number of tests 7353 The chart below shows the start date of any instances where investment in the FTSE 1 Step Down Kick-Out Plan would have resulted in either a capital loss or a return of capital with no additional return: Apr Jul instances of return of capital only FTSE 1 Index Source of Index Data: Bloomberg. First test start date: 3 January Final test start date: 4 February 213 6

7 INVESTMENT PLANS GROWTH FTSE 1 Enhanced Kick-Out Plan This product has a maximum term of 6 years, with the potential for maturity after years 1-6 if the FTSE 1 Index is greater than its starting level. Capital will be reduced if the product runs to the final maturity date and if the FTSE 1 Index is below 6% of its starting level. The table below shows the number of occasions on which this product would have matured at each potential maturity date. Where the product would have reached final maturity, the table shows how many times an investor would have experienced either a positive return, a return of capital with no additional return or a capital loss. Early Maturity in Year % Early Maturity in Year % Early Maturity in Year % Early Maturity in Year % Early Maturity in Year % Final Maturity positive return % Final Maturity capital loss.% Final Maturity return of capital only % Total number of tests 7353 The chart below shows the start date of any instances where investment in the FTSE 1 Enhanced Kick-Out Plan would have resulted in either a capital loss or a return of capital with no additional return: Feb 1999 Feb instances of return of capital only Jan 27 Dec instances of return of capital only FTSE 1 Index Source of FTSE 1 Index Data: Bloomberg. First test start date: 3 January Final test start date: 4 February 213 7

8 For more information, please visit For help call Follow us Investec Structured Products The Plans referred to herein are not sponsored, endorsed, or promoted by the index providers, and the index providers bear no liability with respect to any such Plans or any index on which such Plans are based. The prospectus and relevant Plan brochure contains a more detailed description of the limited relationship the index providers have with the license and any related products. Investec Structured Products is a trading name of Investec Bank plc. Investec Bank plc (Reg. no ) is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority and a member of the London Stock Exchange. Registered at 3 Gresham Street, London EC2V 7QP /TAL319