Josh Mayne, Lowes Financial Management

Q3 represented a relatively steady period for UK markets, not least the FTSE 100 Index. The Index started the quarter at 7,125.16 points and finished the period 0.54% lower at 7,086.42, with an average closing level of 7,082.9.

The previous three months has facilitated 111 maturing products, 93.69% (104 plans) of which realised a gain for investors’, 6.31% (7 plans) returned capital in full without gain, and not one maturity resulted in a capital loss. 20 Lowes ‘Preferred’ plans matured in Q3, with all 20 realising a capital gain.

Q3 2021 maturity results. Source: StructuredProductReview.com

 

All Products

Lowes 'Preferred'

Not 'Preferred'

Number of maturing products

111

20

91

Number returning a positive outcome

104

20

84

Number returning capital only

7

0

7

Number returning a loss

0

0

0

Average total gain

22.02%

34.08%

19.36%

Average term (years)

3.28

4.16

3.09

Average annualised returns

6.59%

7.18%

6.43%

Average annualised returns upper quartile

9.19%

9.15%

9.20%

Average annualised return lower quartile 

3.72%

5.61%

3.34%

 

Q3’s maturing plans generated an average annualised return of 6.57% over an average term of 3.28 years. Continuing from both Q1 and Q2, Lowes ‘Preferred’ plans outperformed the sector’s average annualised returns by 0.61%, though across a longer average investment term of 4.16 years.

The upper quartile of Q3 maturities generated an average annualised return of 9.19%, with the three biggest hitters outlined below…

 1.      Meteor FTSE Semi-Annual Kick Out Plan August 2020. This plan, linked to the performance of the FTSE 100 Index, matured on its first anniversary triggering the return of investors’ original capital in full, in addition to a gain of 12%.

2.      Mariana 10:10 Plan August 2019 (Option 2). This was also linked to the performance of the FTSE 100 and matured on its second anniversary triggering the return of investors’ original capital in full, in addition to a gain of 23.5%, or an annualised return of 11.11%.

3.      Walker Crips UK & US Kick-out Plan (GS114). This plan, linked to the performance of the FTSE 100 Index and S&P 500 Index, matured on its first anniversary triggering the return of investors’ original capital in full, in addition to a gain of 11%.

We’re happy to see the Mariana 10:10 Plan featuring amongst this month’s top performing plans; we have provided input into the concept, development, promotion and distribution of the Mariana Capital 10:10 Plans and as such we are confident that they are the of the best available in the sector. The latest tranche, the Mariana 10:10 Plan October 2021, is currently available for investment and full details can be found here.

Not all maturities in Q3 were able to generate a positive return for investors. 7 deposit-based products matured returning investors’ original capital in full, but with no further interest payment. All 7 of the capital only maturities were growth plans with no early maturity feature; 5 were linked to the FTSE 100, and the others to the performance of the EVEN 30 Index.

Consistent with the previous quarter, the uplift in the FTSE 100 Index from 2020 levels has triggered an increase in positive structured product maturities. Twenty-one plans matured positively in Q3 2020 with none of these being triggered early maturing autocalls. Q3 2021 in contrast witnessed 104 positive maturities with half of these being autocall plans kicking out as a function of the higher market levels.

The chart below plots all FTSE 100 linked autocall structured product maturities from 2016 to date, by reference to the annualised return they achieved on maturity.

Don'tmindthegap2

Source: StructuredProductReview.com

As observable, there is a gap in product maturities coinciding with the coronavirus pandemic and resultant market correction; no FTSE 100 linked capital-at-risk autocall products matured in 2020 after the 3rd of March. Resultantly, all of these plans continued onto their next observation date (no autocall plan was close to its final observation date). 

However, the cumulative effect of the coupons offered means that the longer the market takes to recover, provided it does recover sufficiently to trigger a maturity on, or before the final maturity date, the greater the return - this is certainly a case of ‘Don’t Mind the Gap’.

As the final quarter of 2021 begins to unfold, we look forward to the potential of another successful period for the sector, with more autocall plans that missed an early maturity in 2020 paying dividends in 2021.

Structured investments put capital at risk.

Past performance is not a guide to future performance.

FTSE data sourced from Investing.com.

Disclosure of interests: Lowes has provided input into the concept, development, promotion and distribution of the 10:10. 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.