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Lowes Structured Investment Centre adds defensive option to 10:10 Plan


Lowes Structured Investment Centre (LSIC) has added a defensive option to the second tranche of the its ‘10:10 Plan’, the kick-out structured product that developed in co-operation with provider Mariana Capital and Société Générale.

The new defensive option will generate positive returns and trigger early maturity and kick-out, even if the FTSE-100 is up to 10  per cent below its starting level throughout the maximum 10 year investment term, as part of what is now a triple option Plan for investors, in response to adviser feedback and demand.

Whilst it is acknowledged that past performance is not a reliable indicator of future performance, independently conducted backtesting of the defensive option, dating back to the inception of the FTSE 100 Index in 1984, shows that the strategy would never have failed to generate positive returns for investors*.

The second tranche of the Plan follows the soft closure of the 1st issue in September, with sales surpassing the hedged assets, despite these being increased several times during the offer period.

LSIC, the new structured investment hub developed by Chartered Financial Planning  and advisory firm and widely recognised structured product specialist Lowes Financial Management, in collaboration with the structured investment sector to help advance the sector’s product and service offering for UK-based professional advisers, points to strong advisory interest in the ground-breaking kick-out strategy, which combines the benefits of a longer maximum ten year investment term with short term early maturity and kick-out potential at every anniversary from year three.

The 2nd issue of The 10:10 Plan now offers three options for investors:

Option 1 offers 7  per cent potential annual returns, if the FTSE 100 index is not more than 10  per cent below its starting level at any anniversary, from year 3; Option 2: Offers 9  per cent potential annual returns, if the FTSE 100 index is at or above its starting level at any anniversary, from year 3; and Option 3 Offers 11  per cent potential annual returns, if the FTSE 100 index is 10  per cent or more above its starting level at any anniversary, from year 3.

The 10:10 Plan is the first kick-out product linked to the UK’s FTSE 100 index to use a maximum ten year investment term and combine this with early maturity kick out triggers – a strategy conceived to increase the number of anniversary kick-out opportunities at which successful returns can be generated during the investment term, whilst repositioning investor exposure to market risk through the ‘end-of-term’ barrier that is monitored only at the full term maturity.

If the index is below 90  per cent (Option 1) or the start level (Option 2) or 110  per cent (Option 3) after three years, the Plan continues year-on-year, with the same kick-out conditions at each anniversary, and with the annual coupons ‘snowballing’, i.e. being rolled up, through the investment term to create maximum potential returns of either 70  per cent, 90  per cent or 110  per cent, plus repayment of the original capital, at the full term maturity.

If the FTSE 100 index is below the required kick-out levels at each anniversary and at the end of the maximum investment term, the original capital is returned in full, unless the index is more than 30  per cent lower, when capital is lost in line with the fall in the index. For example, if the Plan has not matured on a previous anniversary and if, after 10 years, the index is 40  per cent lower than its start level, then 40  per cent of the capital invested would be lost.

As with most structured investments, the Plan is dependent upon the solvency of the counterparty, in this case, Société Générale, who have a credit rating of ‘A’ from Standard & Poor’s indicating that they believe the bank has a strong potential to meet its obligations.

Chris Taylor, Head of Strategic Development of Lowes Structured Investment Centre, says: “The 10:10 Plan has immediately highlighted our aims to help the structured products sector break new ground with its investment strategies and engagement with the advisory channel in the UK. The take up of the Plan reflects swift recognition by advisers and investors of the benefits of pushing the maximum maturity date of kick-out plans further out whilst retaining short-term maturity potential.’

‘’It’s hard to argue with the assertion that equity markets are expected to rise over time and short-term equity market risk can be mitigated through longer term investment time horizons. The 10:10 Plan’s combination of short term kick-out potential, offering snowballing coupons from year three, with an extended maximum ten-year investment term, and now incorporating a defensive option that will generate positive returns even if the market falls by up to 10  per cent, brings something new to the sector that is worthy of consideration – a view that is clearly shared by the advisers embracing the strategy.’’

Ian Lowes (pictured), Managing Director of Lowes Financial Management, adds: ‘‘What we have sought to do in launching LSIC, in conjunction with the sector, is to put our knowledge and experience of the sector and its products to work to help broaden and advance the investment strategies that Independent Financial Advisers and wealth managers can access for their clients.  

“In this regard, we’re delighted that the first product co-operation developed through the Centre, The 10:10 Plan, has been so well received – and we have responded straight away to advisers’ feedback by adding a defensive strategy to create triple options for investors, for different investment scenarios, in the second issue. The split of sales in the first issue highlights that many advisers are diversifying across the options, making good use of the different risk/return propositions offered by the Plan. 

“Whilst all providers and advisers are aware of the caveats surrounding past performance the fact is that the historical backtesting* of the defensive strategy shows that since the launch of the FTSE 100 Index in 1984 it would never have failed to generate positive returns for investors, so it undoubtedly presents a compelling addition to the Plan.’’

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