S&P Assigns ‘STRONG’ Rating To Commonwealth Bank’s Vantage+ Product

Standard & Poor’s Fund Services has assigned its ‘STRONG’ rating to the Commonwealth Bank Vantage+ product. This reflects what we view as a solid expected risk-return profile, simple and efficient structure, and clear product philosophy and targeted investor profile.

Commonwealth Bank Vantage+ provides enhanced or leveraged exposure to the price returns performance of the S&P/ASX 200 index over a five-year period. Investors have 5.3 times leveraged exposure to the index capped at an 80% index gain (equating to a maximum return of 323% over the five-year term).

S&P Fund Services analyst Rodney Lay said: “Based on our back-tested and Monte Carlo analysis, we believe the expected return profile adequately compensates investors. Historical back-testing generated average returns of 15.5% p.a. A loss was recorded on 24% of occasions. The Monte Carlo analysis we undertook generated similar results, albeit with a very slightly higher probability of loss.”

“In terms of suitability, we believe investors should have a solid outlook for domestic equities as well as be prepared to incur a significant loss on invested capital. Due to the product’s very high risk-return profile, an investor’s investment amount is totally at risk, so it is suitable for only a small percentage of an overall portfolio. This is a product where a very small part of an overall portfolio can provide five times the exposure to the equities market,” added Mr. Lay.