The Structured Product Fund

Transcription

1 The Structured Product Fund INVESTMENT AIMS The Fund is intended to meet the needs of investors seeking medium to long-term capital growth who are willing to accept a moderate level of risk. It aims to deliver growth at a level higher than can be achieved from a fixed-rate deposit with a bank. Higher returns on an investment cannot normally be achieved without increased risks to capital, or a reduced probability of receiving the returns. The Fund manages the risks to capital in a number of ways, as well as working to enhance the probability of delivering the targeted returns. INVESTMENT STYLE The Fund has adopted broad categorisations for the investments it holds: Core Investments normally constitute 40-70% of the Fund s holdings. These are investments that should deliver steady growth with relatively low volatility (the price shouldn t move too erratically). They will normally be held for longer periods of 6 months or more. Tactical Investments are bought with the aim of delivering strong performance, perhaps over the space of a few months or even weeks. Often these are structured products that have been bought close to a possible maturity point when the price can be attractive. Some tactical investments may be held for longer periods if they continue to offer the prospect of strong returns. Tactical Investments normally make up 0-30% of the Fund. Cash or similar investments (i.e. liquidity funds) normally make up 10-30% of the Fund holdings. In circumstances where the Fund is particularly concerned about prospects for growth, or where few attractive investment opportunities are available, the percentage holdings may increase. KEY BENEFITS Mark to Market Pricing The Fund invests in assets that are priced on a mark to market basis. This means the Fund price reflects the value at which underlying investments can be sold. The price published is the price at which investors can invest and redeem shares in the Fund. Liquidity The Fund has a weekly valuation date and a weekly dealing date. The assets held in the Fund offer daily liquidity, but an asset may occasionally be bought offering less frequent liquidity. This means the Fund can sell the assets it holds very easily and use the proceeds to pay for any withdrawals from the Fund. The Offering Document of the Fund allows for a cap of ninety per cent redemptions on any single redemption day, meaning up to ninety per cent of the investments in the Fund can be realised at the same time. Diversification The Fund must have a policy for spreading investment risk, including restrictions on the percentage of its overall portfolio that may be invested in securities issued by one issuer. It will also seek to diversify its portfolio by asset class and region as part of its ongoing Investment Policy. Page 1 of 6

2 KEY STATISTICS No. of Holdings 10 As at 25 May 2016 Developed Equities 60.30% Emerging Equities 15.31% Commodities 11.12% Cash & Fixed Interest 13.27% Source: Bloomberg CUMULATIVE RETURNS 3 months 6 months 1 year Since Launch YTD The Structured Product Fund (%) MSCI World Price Index (%) Bloomberg Global Investment Grade Corporate Bond Index (%) Source: Bloomberg (Information correct as at ) Percentages in the cumulative returns table are calculated using prices on the dates our monthly Fact Sheets were published in the relevant periods shown. FUND COMMENTARY The improving fortunes of the US economy also had a negative effect on the Gold price and one of our Structured Products which was close to calling, the RBC FTSE100 / Gold Spot auto call recorded a fall of % in May. A strong positive return of 14.79% from the Natixis 5 Yr Low Hurdle GBP helped to offset some of the falls, although the weighting is relatively small in the portfolio at 3.25%. Whilst, the pick up in the US economy might have dampened the Gold price and left investors facing the prospect of rising US interest rates we should not lose sight of the fact that this is ultimately good news for World Growth and Corporate profitability. Valuations notwithstanding we could be entering a very positive phase for building a new base for markets to take out all-time highs over the coming months. The core of the portfolio remains exposed to the developed global equity markets in particular the FTSE 100. Focusing on the UK, despite the confusing nature of the polls surrounding the BREXIT vote, we believe the UK will stay within Europe and we could see a meaningful rally if that occurs. As we have been saying for some time, any marginal recovery in the underlying indices could see a dramatic upward shift in the price of the products, as we have witnessed in periods earlier in the year. If we are wrong about the BREXIT prognosis we feel the barriers we have established within the products are low enough and we could see the fund making progress even in a weak market environment as the products drift higher toward their protection levels. Source: Financial Express Page 2 of 6

3 UBS: Semi-Annual Autocall August FTSE 100 / Gold Weight in Portfolio: 10.18% This is a 6 year note linked to the FTSE 100 and the price of Gold and will pay out a 3% semi-annual coupon providing both underlyings are above their strike levels. It has 100% capital protection unless one of or both of the underlyings are below 50% of their strike value, in which case it will pay out 1 for 1 with the worst underlying. Strike Levels: FTSE , Gold (London PM) The current price is 87.53p with the FTSE 100 down -4.59% and Gold -6.56% with a potential first pay out of 112p in August Managers View: The note offers a high degree of capital protection with a substantial fall needed to trigger the possibility of a loss. The upside potential is significant, 87.53p up to 112p, a gain of 27.9% if both the FTSE 100 and Gold climb above their strike levels and both are within touching levels. To us this is a very attractive note to hold as even if the indices drift sideways or even fall circa 40%, we get better returns than cash as the price drifts up to the 100p protection level and there remains significant upside potential from only a modest rally in the underlyings. Morgan Stanley: Supertracker January FTSE 100 Weight in Portfolio: 9.75% This is a 6 year note linked to just the FTSE 100 index that will pay out 100p plus 215% of the return of the FTSE 100 from 5% below strike up to 118.5% above strike. It also offers 100% capital protection unless the index falls 40%, in which case it delivers 1 for 1 on the downside. Strike Level: FTSE The current price is 96.46p with the FTSE % below strike. Managers View: This note has a high degree of capital protection with 100p on offer unless the FTSE100 falls around 40% from here. It has significant geared upside potential from here if the FTSE 100 moves only modestly higher. If for instance the FTSE 100 were to say move to 7500 at the end of the period, a gain of 17.1%, the note would return approximately 41%. Capital protection with leverage returns is an ideal note to have in the portfolio. Commerzbank: 5yr Triple Market Autocall June EuroStoxx 50 / FTSE 100 / ishares MSCI Brazil Weight in Portfolio: 9.94% This is a 5 year note that will pay out semi- annual coupons of 5.25% providing the 3 underlyings are above their strike level. It has 100% capital protection unless any or all of the underlyings are below 60% of their strike level in which case it pays out 1 for 1 on the performance of the worst. Strike Levels: EuroStoxx , FTSE , ishares MSCI Brazil The current price is 56.18p with the EuroStoxx 50 down -7%, the FTSE % and the ishares MSCI Brazil %. The potential payout in December 2016 would be p. Managers View: Realistically this note is very unlikely to call any time soon and has essentially become incredibly sensitive to the Brazilian ETF it is linked to. If there is only a marginal recovery in that ETF to 60% of strike level it will pay out 100p. If in the unlikely, but not impossible, case the Brazilian market has risen circa 50% from these levels in the next 3½ years the return would be meteoric. We remain holders given the non-asymmetric profile of return from here, one for one downside with leveraged upside but understand that this note will be very volatile. Page 3 of 6

4 RBC: FTSE 100 / Gold Semi-Annual Autocall August 2014 GBP Weight in Portfolio: 6.83% This is a 6 year note linked to the FTSE 100 and the price of Gold and will pay out a 3% semi-annual coupon providing both underlyings are above their strike levels. It has 100% capital protection unless one of or both of the indices are below 50% of their strike value, in which case it will pay out 1 for 1 with the worst underlyings. Strike Levels: FTSE , Gold (London PM) The current price is 84.41p with the FTSE 100 down -8.12% and Gold -4.81% with a potential first pay out of 112p in August Managers View: The note offers a high degree of capital protection with a substantial fall needed to trigger the possibility of a loss. The upside potential is significant, 84.41p up to 112p, a gain of 32.6% if both the FTSE 100 and Gold climb above their strike levels and both are within touching levels. To us this is a very attractive note to hold as even if the indices drift sideways or even fall circa 40%, we get better returns than cash as the price drifts up to the 100p protection level and there remains significant upside potential from only a modest rally in the underlyings. Nomura: 5 Year Global Defensive Autocall Feb 2015 GBP - EuroStoxx 50 / S&P 500 / Nikkei 225 / HSCEI Weight in Portfolio: 10.13% This is a 5 year note that will pay out semi-annual coupons of 4.5% providing the 4 underlyings are above their strike level. It is a defensive auto call in that the barriers reduce by 5% per annum. It has 100% capital protection unless any or all of the underlyings are below 60% of their strike level in which case it pays out 1 for 1 on the performance of the worst. Strike Levels: EuroStoxx , S&P , NIKKEI , HSCEI The current price is 80.11p with the EuroStoxx 50 down %, the S&P %, the Nikkei % and the HSCEI %. The potential payout in August 2016 would be 113.5p. Managers View: Realistically this note is very unlikely to call any time soon and has essentially become sensitive to the Hang Seng China Enterprises Index. This index is volatile and has the potential to rebound sharply and with the barrier declining 5% per annum it could rebound later in the life of the product and assuming all other indices are above the falling barrier the payout could be significantly higher than the current price. A volatile structure that has absorbed most of the downside and again offering dramatic returns if there is a turn in fortune in Chinese shares. SG: 6 Year Defensive Autocall June FTSE 100 / S&P 500 / EuroStoxx 50 Weight in Portfolio: 10.91% This is a 6 year note that will pay out an annual coupon of 10% providing the 3 underlyings are above their autocallable barrier. The barrier declines by 4% per annum, so by the end of the period the barrier is down to 80% of strike level. It has 100% capital protection unless any or all of the underlyings are below 50% of their strike level in which case it pays out 1 for 1 on the performance of the worst. Strike Levels: FTSE , EuroStoxx , S&P The current price is p with the FTSE %, EuroStoxx 50 down -6.34%, the S&P %. The potential payout in June 2016 would be 120p. Managers View: With the next call date not long away there is a possibility that the note will call at 120p which would give good capital uplift without markets needing to move higher. If it misses on this observation date 20/6/2016, the barrier will fall a further 4% and the coupon increase to 130p which would make the note look attractive as a continued hold within the portfolio. Page 4 of 6

5 Natixis: 5 Year Low Hurdle Autocall - FTSE 100 / China HSCEI Index / Oil S&P GSCI Crude Excess Return Index Jan 2013 GBP Weight in Portfolio: 3.25% This is a 5 year note that will pay out annual coupons of 8.5% providing the 3 underlyings are above their strike level. At maturity if the indices are within 50% of the strike level then the note will pay out 100p + 5x8.5p = 142.5p. If any or all of the underlyings are below 50% of their strike level it will pay out 1 for 1 on the performance of the worst. Strike Levels: FTSE , HSCEI , S&P GSCI Crude Excess The current price is p with the FTSE %, the HSCEI % and the S&P GSCI Crude Excess %. The potential payout in January 2017 would be 134p. Managers View: It looks all but a done deal that this note will have little chance of calling prior to the end of the term, so now the question is will the Oil index recover sufficiently to finish within 50% of strike. If it does, the return potential of the note is staggering from 44p up to 142.5p and for that reason we remain holders, with the downside that it effectively behaves like a tracker of the this oil index in the meantime. Natixis: Quarterly Intercontinental Income July 2014 GBP - EuroStoxx 50 / HSCEI / Russell 200 / ishares MSCI Australia Weight in Portfolio: 6.58% This is a 5 year note that will pay out quarterly coupons of 1.75% providing the 4 underlyings are above 80% of their strike level. It has 100% capital protection unless any or all of the underlyings are below 60% of their strike level in which case it pays out 1 for 1 on the performance of the worst. Strike Levels: EuroStoxx , HSCEI , Russell , ishares The current price is p with the EuroStoxx 50 down -4.62%, the HSCEI %, Russell % and the ishares MSCI Australia %. Managers View: This is a very interesting note within the portfolio as the income barrier is set at 80% of strike and at the moment the Australian ETF is within touching distance and the other 3 indices within the target band. There is still plenty of headroom for further falls in the indices and the note would still redeem at 100p. BBVA: Global Markets Catch-Up Income Autocall Mar 2016 GBP - Australia S&P (ASX 200) / Sweden OMX Index (OMX) / Canada S&P (TSX 60) / Switzerland Swiss Market (SMI) Weight in Portfolio: 9.59% This is a 5 year note that will pay out semi-annual coupons of 5.3% providing the 4 underlyings are above 60% of their strike level. It has 100% capital protection unless any or all of the underlyings are below 60% of their strike level in which case it pays out 1 for 1 on the performance of the worst. Strike Levels: Australia S&P (ASX 200) , Sweden OMX Index (OMX) , Canada S&P (TSX 60) , Switzerland Swiss Market (SMI) The current price p with Australia +5.86%, Sweden -1.97%, Canada +6.31% and Switzerland +3.09%. The potential payout on 6th September 2016 would be 105.3p. Managers View: At the moment and barring a major shock it looks likely that the note will call with a 105.3p pay out, which is a return of approximately 11.5% on the price paid. Page 5 of 6

6 Credit Suisse: Developed Markets Income Autocall Feb 2016 GBP - FTSE 100 / Eurostoxx 50 / S&P 500 / Nikkei 225 Weight in Portfolio: 9.57% This is a 5 year note that will pay out semi-annual coupons of 4.6% providing the 3 underlyings are above 80% of their strike level. It has 100% capital protection unless any or all of the underlyings are below 60% of their strike level in which case it pays out 1 for 1 on the performance of the worst. Strike Levels: FTSE , EuroStoxx , S&P , Nikkei The current price 94.63p is with the FTSE %, EuroStoxx %, S&P % and the Nikkei %. The potential payout in 6th September 2016 would be 104.6p. Managers View: It looks likely unless there is a sharp market fall that the note will call with a 104.6p pay out, which is a healthy pick up from the current price. Source: All data Bloomberg. Current Price as at SUMMARY OF FUND CHARGES Annual Management Charge: 1.75% Allocation: 100% Exit Charge (applied during the first 5 years of investment): 5% year 1, 4% year 2, 3% year 3, 2% year 4, 1% year 5. Performance Fee: 10% over +10% p.a. growth on a high-water mark basis No commissions/introducer fees will be taken on any underlying investments Total Expense Ratio: Other charges including Fiduciary Custodian fees, Director s fees, Audit fees and other administration costs will be reflected in the Total Expense Ratio ( TER ) For further details of Charges and Expenses please refer to the Offering Document. Target: 5 15% p.a. growth Early Exit Charge: 5% over 5 years reducing on a sliding scale Liquidity & Dealing: Weekly Performance Fee: 10% on profits over 10% pa on a HWM basis AMC: 1.75% Fund Domicile & Type: Isle of Man Regulated Fund Allocation: 100% CONTACTS Promoter: IDAD Limited Bellamy House Winton Road Petersfield Hampshire GU32 3HA Tel: +44 (0) enquiries@idad.biz Manager: Abacus Financial Services Limited 1st Floor Sixty Circular Road Douglas Isle of Man IM1 1AE Tel: +44 (0) Fax: +44 (0) afsl@abacusiom.com Investment Manager: 8AM Global LLP The Thatched Office Manor Farm Kimpton Andover Hampshire SP11 8PG Tel: +44 (0) Fax: +44 (0) Fiduciary Custodian: Kleinwort Benson (Guernsey) Ltd Dorey Court, Admiral Park, St Peter Port Guernsey GY1 2HT Tel: +44 (0) Fax: +44 (0) IMPORTANT INFORMATION This document has been produced for information only and represents the views of 8AM GLOBAL LLP at the time of writing. It should not be construed as Investment Advice. No investment decisions should be made without first seeking advice. This document is intended for Professional Advisers and Intermediary use only. This document which is issued by IDAD Limited, does not constitute an offer to invest in the Fund, and any decision to invest must be based solely on information contained in the offering documents. Copies of the offering documents, documents constituting the Fund and the latest financial statements for the Fund may be obtained free of charge from the Promoter at the address set out above. It should be remembered that the value of shares in the Fund and the income produced by them could fall as well as rise. Investors may not get back the value of their original investment. The Fund is not subject to the benefit of any compensation arrangements. The Manager is a holder of a Financial Services Licence issued under section 7 of the Financial Services Act 2008 and is licensed by the Isle of Man Financial Services Authority. The investments are advised upon and managed by 8AM Global LLP, which is authorised and regulated by the Financial Conduct Authority. IDAD Limited is the Promoter of the Fund and is authorised and regulated by the Financial Conduct Authority FCA FRN The Fiduciary Custodian is licensed by the Guernsey Financial Services Commission to provide custody services to collective investment schemes and is approved to act as fiduciary custodian to the Fund. In granting permission for the Manager to manage the Fund, the Isle of Man Financial Services Authority has reviewed the constitutional documents but has not commented on, nor is it required to comment on, the investment objectives or strategies of the Fund or its suitability for any investor or class of investor. Potential investors should be aware that past performance is not an indicator of future performance and that historic performance does not take account of any early exit charges that could apply in the event of a withdrawal being made within 5 years of investing. Page 6 of 6