Banking

Structured products in Q2: Positive returns in volatile market

The FTSE 100 index started the quarter at 7,515, rose to an early high of 7,669 and ultimately fell to a June low of 7,016 – helped by the biggest single day fall in the period, when on 16 June, the index lost 3.1%.   

The index finished the quarter almost 5% lower. The average closing level throughout the quarter was 7,424.1 – approximately 20 points less than Q1.

210 plans matured in Q2, with all but one realising a capital gain for investors. Collectively, the maturing plans realised an average annualised return of 6.5%, over an average investment term of 3.2 years.

32 Lowes ‘preferred’ plans matured in Q2, returning an average annualised return of 8.16% across an average annualised return of 3.57 years – outperforming the sector average by 1.64%, and the Q1 ‘preferred’ average by 0.2%. Lowes ‘preferred’ plans are those we view to be the best available at the time of issuance.

Four graphs explaining… fixed income

The one maturing plan that failed to achieve a positive return, Investec EVEN 30 Deposit Growth Plan 56, was linked to the performance of the Even 30 index. This index comprises the 30 least volatile listings on the FTSE 100 index on an equally weighted basis, with no pre-determined bias to any company or sector. The averaging over the final six months of the plan equated to the index being 5.04% down over the term, meaning that investors original capital was returned in full but with no further interest payment.

Consistent with Q1, no maturity in Q2 resulted in a capital loss for investors.

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The ten best performing plans by annualised return are summarised below.

Structured products in Q2: Positive returns in volatile market

Of the ten best performing plans of the period, five were 10:10 plans, earning an average annualised return of 11.4% over an average term of two years.

When concluding our review of Q1, we mentioned inflation rising to a 30-year high at 7%, emphasising the significance of achieving inflation busting returns.

Josh Mayne is a structured product technician at Lowes Financial Management

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