Data collated from the group’s Structured Products Review research site showed that 83.5% of capital-at-risk products matured with a gain, while 12.5% returned only the investor’s original capital. 4% of the products – equivalent to 40 products – matured with a loss. The average annualised return of these products was 8.27% over an average term of 2.95 years. The maturities spanned the period from 1st March 2011 to 14th September 2015.
The top 25% of products made an average annualised return of 12.94% over an average term of 2.6 years, while the bottom quarter made an equivalent figure of 3.25% over 4.45 years. Lowes Financial Management acknowledged that this was a bullish period for markets, but said that many of the products were launched before the credit crisis crash. The FTSE 100 has delivered compound annual reutrns of 5.5% over the past five years (source: FTSE, to 30 September 2015)
The best performing product on an annualised return is the Meteor FTSE 5 Quarterly Kick-Out Plan 5, which was an auto-call contract linked to five FTSE 100 stocks and made 24% over the year until maturity. The best performing product on a total return basis was the Investec FTSE 100 Accelerated Growth Plan 6, which was a FTSE super-tracker and produced a total return of 122.6% over the five year term, against a 85.6% rise in the index. This equates an annualised return of 17.35%.
The worst performing product on an annualised return basis was the Arc Stepped Kick-Out Plan 1, which was an auto-call linked to the FTSE 100 and Nikkei 225 Indices. The product was launched at the market highs of June 2007 and made an annualised loss of 11.54%.
Ian Lowes, StructuredProductReview.com founder, and managing director of Lowes Financial Management, said: “Markets have been volatile as of late, which has reminded us all of the importance of having exposure to investments within your portfolio that protect against market falls. While structured deposits or capital ‘protected’ products may be an option for the most conservative investor, capital-at-risk plans offer more attractive potential returns for original capital being put at the risk of loss.”
Capital-at-risk products are those that offer higher potential returns for exposing investor’s capital to the risk of loss. They are distinct from structured deposits and structured capital ‘protected’ products, which are designed to protect capital at maturity.
