Citi has launched a new share class of its Autocall Fund which launched in April 2010.
An autocall product is a market-linked investment which can automatically mature (autocall) and generate returns prior to the scheduled maturity date if certain predefined market conditions are achieved (an autocall trigger).
The product allows investors to benefit from attractive returns in rising or flat UK equities markets while maintaining some conditional capital protection.
Citi’s UK Autocall Fund combines popular autocall features with a highly regulated, liquid, open-ended UCITS fund structure collateralised with government bonds.
The new share class offers an annual return of seven per cent (per share unit based on GBP100 initial issue price), over a maximum of six years. Capital is protected at maturity as long as the FTSE 100 is above a barrier level (60 per cent of its start level) at the end of the first investment cycle on 5 December 2019.
The fund’s first autocall trigger would occur two years after the launch date if the FTSE is at or above 100 per cent of its start level. Thanks to the open-ended structure of the fund, any returns generated would be automatically reinvested into a new autocall strategy, potentially optimising accumulated investment returns over time. For example, if the FTSE is at or above its start level of 6498.33 on 5 December 2015, the initial strategy will return 14 per cent and the fund will automatically reinvest those proceeds into a new autocall strategy, which starts a new investment cycle with new return, autocall trigger and barrier level terms. If an autocall is not triggered and the FTSE has fallen below the barrier level at the end of the investment cycle, the value of the shares will be reduced by a percentage equal to the FTSE decrease from its start level.
“As investors increasingly look for consistent returns while maintaining a degree of protection, the UK Autocall fund offers a unique and flexible structure with an attractive risk/return profile,” says Rohan Tawadey, vice president, UK equity and multi-asset solutions sales. “Unlike most other autocall products, this new share class observes the barrier level once only at maturity, rather than over the whole investment cycle. The ability to take proceeds at any time or remain invested in new investment cycles could offer investors a useful flexibility in managing their investment portfolio.”
