Citi FTSE 100 Defensive Auto call Plan 29
Dura Capital have recently launched their 29th public offer. Plan 29 will be utilising Citi Group as counterparty (A+ rated by S&P), Citigroup is the third largest bank in the US by total assets and operates in 32 countries globally.
The FTSE 100 makes reference to the UK’s largest 100 companies as listed on the London Stock Exchange and is seen as a gauge of prosperity and the UK’s main index, although many companies listed are ‘global’ in relation to reach and income source.
The term Defensive refers to the product features which the plan provides and has the potential to return 7% a year even in a negative market. The FTSE 100 index could fall as much as 24% and a return of 56% (+ Initial Capital return) would still be possible.
Let’s take a look at the barriers in detail…… (No call, 100%, 100%, 95%, 95%, 90%, 85%, 75%) What does this mean to an investor?
For those who are familiar with structured products this will be preaching to the converted, however, an Autocall product has ‘call’ features. What this means is that the although the product is an 8-year Investment, it provides terms that offer the opportunity for the investment to mature early (this is in the investor’s interest). At the end of each year the level of the FTSE 100 will be observed which dictates if the ‘contract investment’ either matures or remains invested.
- No call year 1 – Regardless of what the market does the product will not mature.
- Year 2 – 100% if the FTSE is at or above its initial level (when bought) an investor will receive the initial investment + 14%.
- Year 3 – 100% if the FTSE is at or above its initial level (when bought) an investor would receive the return of the initial investment plus 21%.
- Year 4 – 95% if the FTSE is at or above 95% of the initial level (when bought) an investor would receive the return of the initial investment plus 28%.
- Year 5 – 95% if the FTSE is at or above 95% of the initial level (when bought) an investor would receive the return of the initial investment plus 35%.
- Year 6 – 90% if the FTSE is at or above 90% of the initial level (when bought) an investor would receive the return of the initial investment plus 42%.
- Year 7 – 85% if the FTSE is at or above 85% of the initial level (when bought) an investor would receive the return of the initial investment plus 49%.
- Year 8 – 75% (This is the year where your investment has 3 routes rather than the 2 observed in previous years).
- If the FTSE is at or above 75% of the initial level (The level struck upon purchase) an investor would receive the return of the initial investment plus 56%.
- If the FTSE is below 75% but above 60% of its initial level an investor would have the capital returned with no additional return, (This will essentially mean an investor made no positive return and the capital invested will have been eroded by the effects of inflation, however history would suggest that this is extremely unlikely).
- This is the scenario in which your capital is at risk; if the FTSE 100 is less than 60% of its initial level on the final year then the capital invested will be eroded on a 1-1 basis with the Index. Historically this scenario has never occurred, however past performance is no guide to the future and if the FTSE 100 was to fall to this level and not recover during the life of the product then capital is at risk on the basis described.
There is also the risk that if Citigroup was to fail then your investment could be of no value, Counterparty is an imperative feature to review when looking at structured products.
Over the last 10 years the typical capital at risk structured product has an average return of 8.55% p.a.
The average return of the FTSE 100 TR (Total return, Growth + dividends) has been 8.14. Historically, the investment markets have experienced a Bull market run since the Global Financial crisis. Predicting the future is impossible although, being realistic, coming off such investment market lows following the Global Financial crisis and with central banks using financial tools, such as Quantitative Easing and low interest rates, it may be asking ‘too much’ of the investment markets to deliver similar results to the last 10 years. As we always state, diversity, using quality products at the Best Price is key to producing the best investor outcomes.
As always, we must confirm that providing the details of this plan to investors does not constitute a personal advice recommendation. ‘Advice’ is always specific to an investor’s needs, and provided following the ‘Know Your Customer’ journey required by the regulator – the FCA.
If you require advice, simply get in touch where we will be happy to assist you, providing suitable advice always.
Best wishes for successful investing and financial planning.
Don’t Forget the Risks – https://www.bestpricefs.co.uk/structured-products/citi-ftse-100-defensive-autocall-plan/#risks
(Figures above are from a recent 10 year review conducted by LOWES – https://www.lowes.co.uk/10-year-review/)
Best Price FS Team
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