Successful close of Investec structured product confirms demand for developed market exposure
07 November 2013 | Investments | General | Brian McMillan, Investec
Investec USD S&P500 Digital Plus to list on 14 November 2013.
The enthusiastic response from the market to Investec’s USD S&P500 Digital Plus, a structured product offering which closed at the end of October, evidences the demand for investment into well developed economies as the global economic recovery continues.
Brian McMillan, of Investec Corporate and Institutional Banking explains:
"With the recovery led by the USA, as the benchmark for the largest 500 companies in the USA, the S&P500® Index stands to benefit. With this in mind, Investec Structured Products launched a new investment product – the S&P500 Digital Plus. As a 3.5 year growth investment linked to the performance of the S&P500 Index in US Dollars, we were not only able to offer investors the opportunity to invest in the S&P500 Index but the ability to do so in US Dollars.
The S&P500 has been widely regarded as the best single gauge of the large cap U.S. equities market since the index was first published in 1957. The index has over USD 5.58 trillion benchmarked, with index assets comprising approximately USD 1.31 trillion of this total. The index includes 500 leading companies in leading industries of the U.S. economy, capturing 75% coverage of U.S. equities.
As the US recovery becomes more sustainable we have seen a deleveraging of US household debt and an increase in the health of corporate balance sheets. This has led to the Fed forecasting growth in the US of 3% for next year with inflation seemingly under control. These factors combined with increased confidence and employment has led to a rally in the S&P500 over the last year.
The Investec USD S&P500 Digital Plus gives the investor the opportunity to participate in the growth potential of the S&P500 Index by providing a minimum 28% return should the index be positive, plus 100% of the upside beyond 28% in US Dollars.
In addition the investor receives capital protection if the S&P500 falls; provided it does not fall by more than 30% during the term.
The great thing about using the S&P500 is that it gives the investor a balanced and diversified exposure to the US market. This combined with the ability to provide a level of capital protection should the index be negative resulted in a great response from our client base making this one of the largest offerings of its kind so far.”
Now due to list on the JSE on 14 November, the Investec USD S&P500 Digital Plus is an inward listed instrument under the Investec warrant and note programme. While the opportunity to invest in this particular instrument has passed, similar opportunities will soon be available.
McMillan concludes: "We will definitely look to issue similar types of products in the future in an effort to provide the South African investing public with easy to access offshore products with exposure to European, American and other international equity markets.”
