Innovative 10:10 proving its worth

Ian Lowes, Lowes Financial Management

In late 2015 the first 10:10 Plans were launched as a cooperation between Lowes and Mariana Capital. These investments drew upon Lowes extensive experience in the structured investment sector and took advantage of what we believe to be a pricing anomaly, whereby extending the maximum possible term of an autocall (or kick-out) product beyond the then typical six years to, in this instance ten years, had minimal negative impact on the potential returns, whilst increasing the number of potential opportunities for positive returns to be achieved.

The 10:10 Plans were followed by the Investec/Lowes 8:8 Plans, which have a maximum possible duration of eight years and it is pleasing to note that most structured product providers have now accepted the Lowes logic, to the extent that terms beyond the traditional six year maximum are now commonplace.

We are delighted to note however, that for the first issues of the 10:10 Plans, the extended terms have not proved necessary. In the fourth quarter of 2018 all eight options of the first three tranches matured at their first opportunity returning, on average 8.75% per annum over their three-year holding periods when the FTSE 100 averaged just 3.45% pa. Whilst this is an exceptional result, it is made even better by the fact that for these investments, in recognition of Lowes input in helping to develop the 10:10 Plan, Mariana made a significant contribution to charities selected by the Lowes Charity Committee, for which we are extremely grateful. So all in all, the 10:10 Plans have thus far produced exceptional results for all concerned as well as a number of worthy causes.

The new issue of the 10:10 Plan introduces Goldman Sachs as counterparty and has benefited from recent market volatility, to the extent that it offers a very attractive, potential gain of 12.28% for each year held, payable on the first anniversary, from the second onwards where the FTSE 100 is the same, or higher than at commencement or, for the option that requires the FTSE to be at least 5% higher the potential gain is 14.51% for each year held.

Another structured investment solution that we have brought to the market is the Lowes UK Defined Strategy Fund which draws upon all of our expertise in this sector and is effectively a basket of many such investments, diversified across a range of counterparties and market observation dates. It’s a great opportunity for investors to benefit from the returns generated by structured investments but within a fund structure which provides daily liquidity and is more tax efficient.

Details and literature for the latest 10:10 Plans can be found at www.StructuredProductReview.com/Products

Details and literature for the Lowes UK Defined Strategy Fund can be found at www.UKDSF.com

Disclosure of interests: Lowes has provided input into the concept, development, promotion and distribution of the 10:10 & 8:8 Plans and is investment manager for Lowes UK Defined Strategy Fund. Lowes has a commercial interest in these investments as a result of its involvement. Where Lowes is involved in advice on these investments to retail clients, it will not receive benefit of any fees for its involvement, other than those fees payable by the client to Lowes. Lowes has robust systems and controls in place to ensure that it manages any actual or potential conflicts of interests in its activities.