Boutique investment manager Instreet is offering a new structured product that gives investors a lower thresh-hold to break even over a three-year period.
Instreet managing director George Lucas says:
“The feedback from financial planners suggests investors want to have a lower break-even point as the markets remain subdued.
“With this in mind, Instreet has designed Instreet Series Link 48A, another in its Link Series, which provides a three-year exposure to Barclays ComBATS VOLT 5.0 per cent Excess Return Index (ComBATS Index).
“What makes this product different is the low breakeven of 2% over the three-year term. The issue price of $1.60 per unit, which is a faction of the notional of $10 exposure to the ComBATS Index, also sets it apart.”
Lucas says if the ComBATS Index remains flat over the three-year term, investors will receive $1.40 back, and a 5% gain in the reference index over three years will translate into $1.90 at maturity.
“This compares to other structured products that provide leverage to growth assets where the break-even thresholds are higher and more in line with the interest payments that are lost if the reference index remains flat.
“The product is designed for advisors and their clients who are in a sober mood brought about by the current market conditions. They want positive returns from their investments even when markets only post modest returns.”
The ComBATS index is a market neutral commodity alpha strategy, involving long/short positions in 10 commodities – crude oil, natural gas, heating oil, aluminium, copper, nickel, zinc, wheat, sugar and lean hogs. This index has a low correlation to the equity markets and can provide an exposure to alternative assets through a process which is more transparent than hedge funds.
Lucas says: “This product, which has been awarded a ‘recommended’ rating by the Lonsec research house, offers uncapped upside potential to an alternative asset class that will assist in portfolio diversification.
“It’s an SMSF friendly product with a known risk, as the maximum loss is the initial investment upfront.
“In the worst case scenario, if the reference index – less all fees – goes down more than 8% from its initial level, investors could lose their initial investment. The units are therefore most suited to investors wanting high growth.”
17 July 2012
