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New Investec product multiplies FTSE 100 returns by 10

15 July 2015 Brian McMillan, Investec

A new investment product designed to maximise returns and protect capital in volatile markets.

According to the International Monetary Fund, global growth for 2015 is expected to be moderate, with uneven prospects across the developed world. Relative to last year, the outlook for advanced economies is improving, whilst growth rates in emerging markets and developing economies is projected to be slower.

“Extracting returns from equity markets remains difficult as volatility is increasing while equity markets are still expensive relative to historical levels increasing the need for international diversification,” says Brian McMillan of Investec Structured Products.

The bank’s newly launched Investec FTSE 100 Multiplier (“Multiplier”) is linked to the UK blue chip FTSE 100 “UKX” Index, and offers South African investors exposure to internationally diversified sectors and companies. “The UK economy has been recovering at a relatively strong rate since early 2013, with limited exposure to events in the European Union. That aside, theMultiplier has been designed to maximise returns even if the Index performs moderately over the term of the investment, a huge advantage in volatile markets,” says McMillan.

The Multiplier provides investors with an opportunity to make geared Rand denominated returns from small positive movements in the FTSE100 over the investment term, providing 10 times the return of any growth in the Index to a cap of 7.5%, thus giving a maximum potential return of 75% in Rands. In addition, to limit potential volatility, the investor will receive 100% capital protection at maturity provided the index does not fall by more than 40% at any time during the term of the investment.

FTSE 100 Multiplier pay-off profile at expiry

At maturity, assuming the Barrier has not been breached, the Investor’s capital is guaranteed and the product payoff will be as illustrated below:

At maturity, assuming the Barrier has been breached, the Investor’s capital is not guaranteed and the product payoff will be as illustrated below:

Applications for the Multiplier is open for investments until 28 August 2015 and has a start date of 2 September 2015. The minimum investment is R100 000 and while it is possible for an investor to exit the investment before the scheduled maturity date, the Multiplier has been designed for a three year and nine month holding period.

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