Structured investment hub developed by Lowes Financial Management launches first maximum 10-year kick-out/auto-call plan.
The new structured investment centre www.Lowes-sic.com is offering their first investment product offering with a 10-year maximum investment term, that can kick-out from year three.
Developed with independent provider Mariana Capital and global investment bank Societe Generale as counterparty, the 10:10 Twin Option FTSE Kick-Out plan offers two options, with either 10 per cent potential annual returns, if the FTSE 100 index is at or above its start level at any anniversary (option one) or 12.5 per cent potential annual returns if the index is at or above 110 per cent of its start level (option two).
The first maturity opportunity option is from year three.
If the index is below the start level (option one) or 110 per cent (option two) after three years, the plan continues year-on-year, with the same kick-out conditions assessed at each anniversary, and with the annual coupons rolled up through the term to create maximum potential returns of either 100 per cent or 125 per cent, plus original capital at the full term maturity.
If the FTSE is below the required kick-out trigger levels at each anniversary and at the end of the investment term, the original capital is returned in full, unless the index is 30 per cent or more down, when capital is lost in line with the fall in the index.
This means that the loss in capital would track the percentage fall in the index on a one-for-one basis.
Therefore, 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 original capital investment capital will be lost.
As with most structured investments, the plan is also dependent on the continued solvency of the counterparty, in this case, Société Générale, who have a credit rating of ‘A’ from Standard & Poor’s.
Charges are accounted for in the terms of the plan and according to Lowes are not expected to exceed 3.5 per cent over the 10-year maximum investment term.
The share of fees due to Lowes from Mariana in respect of any investment transacted by any of Lowes’ clients (advised or non advised) will be redirected to charity.
Chris Taylor, head of strategic development of Lowes Structured Investment Centre, said: “It is hard to argue with the assertion that equity markets are expected to rise over time and that short term equity market risk can be mitigated through lengthening the investment time horizons – this is a fundamental principle and belief in investing.
“For advisers and investors who believe longer term investment horizons mitigate short-term risk, the 10:10 plan should prove worthy of consideration, with the combination of short term kick-out potential, from year three, and an extended maximum investment 10-year term.’’