Max Darer, Lowes Financial Management, 15/05/2024

Given the recent meteoric rise in the FTSE 100 above 8,000 and counting we reflect on a collection of 6-year max term FTSE only autocalls reaching their final observation date and last opportunity to mature with a positive return.

Careful not to jinx anything *touch wood*, the current FTSE 100 levels will see all such plans mature positively with gains ranging from 43.5% - 61.5% for the six years held. It would be pointless to predict where the market will take us between now and mid-August but so long as the FTSE remains above 7,779 that would see all thirteen of the plans see out their six-year terms successfully.

I would be willing to put my money on saying that the barrier levels will remain untouched and the risk of investors’ losing capital will not be an issue investors’ have to worry about. All but two of these structures used 60% end of term barriers, the remaining two had greater protection in 50% barriers. The chart below demonstrates not even a pandemic sized crash could result in loss of capital.

Before the recent rise in the FTSE and we were hovering around 7600-7900 level, it seemed destined to be that six-years of snowballing coupons or return of capital only for the plans was the flip of a coin. At which point investors may have been monitoring the indicative prices that were being offered to surrender the plan early. At the time of writing Meteor’s FTSE Kick Out Plan June 2018 is offering a surrender value of 150.1 compared to potential maturity gain of 155.8 a month later. With a strike price of 7,742 and current FTSE 100 level well in the 8,200s the plan is well in the money to mature with the entire gain. Importantly there are also surrender value charges of £150 + VAT as stated on the plan literature.

To date, out of over 1900 FTSE linked autocalls that have reached maturity only 13 failed to produce a gain. Of these 8 reached final maturity over ten years ago and all but one would have matured with a gain had they had a maximum duration of 7 years. The other 5 matured late last year and obviously at current market levels these would also have realised positive returns if they had had an extra year on their original terms. If the FTSE position is maintained all of the autocalls issued to date, including those with shorter maximum terms will mature positively long before their final observation date, however given that we know that we can’t predict future market positions we will continue to favour the use of longer maximum durations, just in case.

Data sourced from StructuredProductReview.com and Investing.com

 

Structured investments put capital at risk.

Past performance is not indicative of future results.