Benefits of Volatility – with current Structured Product plans from quality providers
Volatility creates huge a uplift with potential return, which is why current issues are so very attractive.
Headline rates with Structured Investment Products.
Contract based investments (Structured Investment Products) are priced using volatility as a measure, which impacts the ‘risk premium’ – as explained in a previous email; ‘What is Volatility?’ https://www.bestpricefs.co.uk/blog/dura-capital-have-launched-two-new-plans/
More Volatility = Higher Risk = Higher Potential for Return
Given the ‘Christmas Crash’, which was driven by a number of factors; Trade Dispute/War, US Shutdown – Trump, Brexit, a number of Plan Managers issued terms offering stellar potential headline rates which, in our view, should be considered as the terms are likely to reduce with future issues (unless another extremely volatile period develops).
‘No brainer’ for investors on the basis of potential return v downside barriers
Investors may have missed the current terms available, so we are highlighting these terms so consideration can be given to the investment offer currently available. (An early close may appear with a number of products (due to popularity and reducing volatility), so if you wish to invest, you may want to consider taking action urgently).
Tempo’s current Plan range
As an example of market leading terms we attract our clients’ attention to a number of plans issued by Tempo, but namely the Long Growth Accelerator Plan Option 2.
This plan offers the potential to produce 28% return per year (not compounded) with a Barrier level of 60% of the FTSE 100 FDEW. You must note that advice in relation to the suitability of this product to meet an investor’s needs is required, nevertheless the terms are simply market leading and, in our view, “A buy now, while stocks last investment solution”.
Tempo’s range – defensive by design
Structured products are capable of offering – and the evidence is that they are delivering – high single-digit potential returns for investors, with compelling risk / return profiles. In fact, there are certain plans offering the potential for high double-digit returns. For example, Tempo’s Long Kick-Out Plan Option 3 offers a coupon of 14.75% p.a. and its Long Growth Accelerator Plan Option 1 offers a tantalising 17% p.a. at the 5th anniversary, while Option 2 offers an eye-catching (or should that be eye-watering?!) 28% p.a. at the 5th anniversary (as detailed above). Yes, you did read that correctly, it offers the potential for a 140% return (plus repayment of capital) at the 5th anniversary, i.e. a 28% per year (non-compound) return against a barrier level of 60%!
It is critical to remember and understand that most structured products provide investment strategies which do not need the market indices to rise in order to generate positive returns, with protection on the downside if it falls.
HIGHLIGHTING THE INCREASE IN THE NEW TERMS OF TEMPO’S PRODUCTS …
The following table highlights the significant increase in the terms of Tempo’s latest products, compared to recent issues, as a result of the current market volatility (and increased dividend yield, due to the index level being lower):
As can be seen, the uplift in the terms is significant, compared to the December and October issues. For example, comparing the new terms to the October issue:
>the coupon for option 3 of the Long Kick-Out Plan now offers 14.75% p.a., i.e. an additional 3.65% p.a.
> the coupon for option 1 of the Long Growth Accelerator Plan, at the 5-year kick-out point, now offers 85%, i.e. 17% p.a., an additional 6.5% p.a.
> the coupon for option 2 of the Long Growth Accelerator Plan, at the 5-year kick-out point, now offers an incredible 140%, i.e. 28% p.a., an additional 10.75% p.a.
These are the same products as previously, with the same conditions for returns to be generated, with a potentially better entry level for the index, so these materially uplifted terms present really compelling opportunities for investors which is why we state the offering is a ‘buy now while stocks last’ product, if the plan is suitable to meet your needs.
It really is hard to identify investment strategies better suited to the current investment environment. And the efficacy of structured products and their ability to add value within diversified and balanced portfolios for investors, within the investment environment we are now in, should be clear.
Of course, as with all investments, there are risks involved. Whether or not structured products generate the potential returns for investors usually depends on the closing level of the relevant index that the plan is linked to, on the relevant dates for the plan, i.e. the kick-out and end dates, etc. If the relevant index for the plan closes below the level needed, for the plan or plan options chosen, on all of the relevant dates, the plan or plan options will not generate a return. And the repayment of money invested at maturity may also depend on the closing level of the relevant index on the end date, with the potential for loss of capital if the index closes below the percentage of the start level that nay protection barrier is set at. For example, if the barrier is set at 60% of the start level, and index has fallen by 45%, the repayment of money invested will be reduced by 45% (meaning that investors will get 55% of their investment back).
Both the potential returns and repaying the money invested depend on the financial stability of the Issuer and Counterparty Bank. If the Issuer and Counterparty Bank become insolvent, or similar, or fail to be able to meet their obligations, it is likely that investors will receive back less than they invested.
Tempo have produced a valuable ‘Tempo Issuer and Counterparty Scorecard’ (TICS), available on our website, which helps investors understand more about the strength of banks behind Structured Products – https://www.bestpricefs.co.uk/structured-products/tics
We are very careful to explain the risks just as clearly as the benefits of structured products – and we provide extensive information on our website to help investors understand these risks in detail.
Take a good look at the structured products available right now – as the terms are exceptional. Tempo’s products, in particular, are offering materially improved terms for investors in the current tranche, which represent really compelling opportunities for investors.
In order that you understand ‘issuer risk’ take a good look at an article by David
Stevenson; bank fears should worry all investors – https://citywire.co.uk/funds-insider/news/david-stevenson-bank-fears-should-worry-all-investors/a1187317?ref=citywire-money-opinion-list
Don’t forget the Risks – https://www.bestpricefs.co.uk/structured-products/long-growth-accelerator-plan-option2#risks
As always, we must make a regulatory statement – Past performance is no guide to future performance and unit prices can fall as well as rise.
Buying products without taking advice provides no regulatory protection via the Financial Ombudsman Service (FOS). Investing via the Best Price FS advised process provides protection for the investor via the FOS in respect of the ‘suitability’ of the product to meet the investor’s needs.
Advice is always specific to the needs of the investor. The products detailed in this document are not to be taken as a recommendation to invest in, a recommendation would always be personal to your needs.
As always, if you would like advice, simply get in touch.
Best Price FS Team
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