Challenging pricing environment | strong sales into issue 9
Issue 9: ‘Part 2’ available for continuing investments into the Long Kick-Out Plan
Sometimes when we promote structured products, we highlight that the tranches are scheduled to be open until a certain date, but that they may close early – usually due to demand outstripping the provider’s capacity for the tranche.
That may sound like a sales tactic, designed to try to cajole sales. But it is, in fact, completely the case that structured products can and do close early, and that investors who want to access great products, which they like, should generally try to invest early in the offer period in order to try to ensure availability.
A good example of this can immediately be seen today. Due to a combination of a challenging pricing environment currently and strong early investment into issue 9 of Tempo’s product suite, Tempo have today had to take the decision to start closing off the Long Kick-Out Plan options, and to immediately prepare a ‘Part 2’ for this tranche, to accommodate ongoing investments in this tranche.
What are Tempo doing: operating on a ‘first come, first served, monies received basis’
Tempo are operating on a ‘first come, first served, monies received’ basis, which is the most appropriate and fairest way to treat investors (under Treating Customers Fairly ‘TCF’ principles).
However, anticipating that they will be unable to accommodate all ongoing investments into all of the Long Kick-Out options Tempo have immediately arranged ‘issue 9: part 2’, in order to be able to accept all remaining and ongoing investments during the offer period.
‘Issue 9: part 2’: same start date, same details, slightly different terms
Issue 9: part 2 for the Long Kick-Out Plan has exactly the same start date (18 October) and exactly the same plan details as issue 9 – with only the coupons differing, i.e. slightly lower (but still highly competitive).
At this stage, we are only able to provide an indicative range regarding the terms, prior to the plan brochures being publicly available on Tuesday 1st Oct, but we can indicate the following:
LKO1 Option 1 range of 9.9% – 10.3% pa (reduced from 11.6%)
LKO2 Option 2 range of 8.7% – 9.1% pa (reduced from 9.95%)
LKO3 Option 3 range of 14.8% – 15.2% pa (reduced from 17.55%)
Plan literature and all of our normal supporting information for investors will be available from Tuesday 1st October.
At this stage, Tempo still have capacity for the Long Growth Accelerator Plan, however, to help indicate how competitive the current terms are, the following is a guide as to where the terms would be at this time:
LGA1 Option 1 could reduce from 100% at Y5 to c.75%
LGA2 Option 2 could reduce from 167.5% at Y5 to c.135%
Process for investments into issue 9 going into issue 9: part 2
Issue 9: part 2 will continue to offer excellent terms, Tempo’s 2nd best to date and still exceptionally attractive when compared to other products currently available.
As stated, Tempo will try to accommodate all investments into issue 9, on a first come, first served, monies received basis. However, where they reach capacity on any of the Long Kick-Out options, investors can seamlessly access issue 9: part 2.
If an application form for issue 9 has already been submitted, the process for Tempo’s plan administrator, James Brearley, to use that application form for issue 9: part 2 simply requires an email from the adviser, in other words us, to James Brearley, to confirm this. Nothing is required from the investor.
Why is this necessary: challenging pricing environment?
As many investors will be aware, stock market dynamics (most particularly the level of the stock market index and prevailing volatility) and other factors affect structured product pricing / terms.
The potential returns of Tempo’s issue 9 are their best to date, reflecting the market dynamics at the time that they arranged the assets for the tranche, during August. This was generally quite a volatile period, with 1-2% market movement up or down (mostly down) per day not uncommon, resulting in a lower index level, prior to the launch of the tranche on 3rd September. However, since launching, so far during September we have seen the market generally, albeit relatively moderately, move higher (with various factors at play). This has made the pricing of the assets for the tranche more difficult, to the point where Tempo have had to close the tranche off and open issue 9: Part 2.
Citywire article, by FT columnist David Stevenson
Hopefully the above is helpful re explaining the background to this situation.
There is a very interesting article written by respected FT columnist David Stevenson (who also writes articles in our newsletter, ‘Structured Product Investor’), in Citywire, this week, which refers to some of these points, and which draws attention to the Tempo products – please click on the following link:
Summary: act now if you want to invest in these plans
As we highlighted when we promoted the launch of the Tempo product suite, the terms are exceptional – and this remains the case. If you would like to invest in these plans to take advantage of these rates, please let us know.
DON’T FORGET THE RISKS
As with all forms of investment there are risks involved. These plans do not guarantee to repay the money invested. The potential returns of the plans and repaying the money invested are linked to the level of the stock market and also depend on the financial stability of the Issuer and Counterparty Bank.
The promotion of the plans does not constitute ‘advice’ to invest. Advice is always specific to an individual investor’s circumstances and needs, following the process of ‘know your customer’, with the aim of ensuring that any product is suitable for an investor.
Best Price FS Team
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