Investec Wealth & Investment (IW&I) has launched a dedicated Structured Product Service (SPS) for wealthier clients of financial advisers.
Clients can choose from two pre-determined portfolio mandates to best reflect their personal circumstances, risk appetite and investment objectives.
The first is the Defined Returns Structured Product Portfolio (Medium/ High Risk), which is intended to provide a positive return in multiple equity market scenarios, although returns are likely to be negative if equity markets fall substantially (i.e. between more than 40 per cent to 50 per cent) and do not recover over a period of time. The sensitivity of the portfolio to the underlying equity markets would be approximately between +35 per cent to +75 per cent at the initial investment stage. The target return, net of management fees, is UK Base Rate plus 3 per cent.
The second is the Diversified Growth Structured Product Portfolio (High Risk), which is intended to provide greater potential for capital growth but the level of risk is also greater. The sensitivity of the portfolio to the underlying equity markets is likely to be nearer the higher end of the circa +35 per cent to +75 per cent range at the initial investment stage (and perhaps even greater than +75 per cent). The target return, net of fees, is UK Base Rate plus 4 per cent.
Both options give clients access to institutional structured product markets, which has two advantages: substantial cost savings as fees charged in the retail market are materially higher; and access to liquid secondary markets (unlike structured products traded in the retail market, whereby an investor’s money is often locked-in for a multi-year period). Combining these structured products in the context of a portfolio will allow investors to diversify risk and maximise potential returns.
Mark Stevens (pictured), head of intermediary services at Investec Wealth & Investment, says: “We have extensive experience of the structured products market and, following thorough consultation with advisers, we believe now is the right time to launch a dedicated service. Managed correctly, structured products can provide the outperformance and portfolio protection that many advisers and their clients are looking for.”
All portfolios are centrally managed by IW&I’s specialist structured products team. The minimum investment for both products is GBP250,000, and each will only be made available to clients following the completion of a rigorous due diligence process.
Peter Tasou, associate portfolio manager and head of structured products at Investec Wealth & Investment, says: “We have very close relationships with product providers, who respond to our needs. We adopt an active rather than passive approach to structured product portfolio management as, contrary to popular perception, they are not simply ‘buy and hold’ investments.
“Portfolios will be managed by a team with a high level of experience of derivatives and bank credit, the two key components of any structured product. The team understands how to optimally design structured products, construct and manage portfolios and factor in the changing risk parameters of each product over its life cycle.”