Instreet will issue a specifically tailored structured product for Personal Choice Management (PCM) which provides investment services and products for AIOFP members. PCM is a member owned AFSL holding entity that utilizes the scale of AIOFP members to negotiate superior conditions for clients and advisers. 

Peter Johnston, Director of PCM, said: “Our member feedback shows that advisors are looking for new investment options to differentiate their business from institutionally aligned practices as optimism comes back into the Australian market. We have partnered with Instreet, a strong player in the structured products sector, to meet this demand.”

“The PCM Structured Product was designed with a working committee of advisers within the association to ensure that the end result was an investment solution that was relevant to a diverse range of advisers and their clients.” 

George Lucas, managing director Instreet, says: “We are very excited to partner with AIOFP as we have always valued feedback from independent advisers to develop relevant products for their clients.

“We have been offering a tailored solution to the market for a number of years now.  It is an empowering experience for our customers as it contributes to their own unique business proposition by delivering a tailored solution for their clients that truly respond to their investment needs. 

“This was the criteria set up by AIOFP in front of us. This new product allows AIOFP members to create value for their clients. It offers them access to specific markets and build investment strategies with underlying investments covering Mid Cap US stocks, European Stocks, South East Asian stocks and Australian markets,” Lucas says.

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“In the current market environment, bespoke products appeal to advisors and their clients who have specific views on the market and are looking to implement these in their client portfolios while managing the risk with known downside outcomes.
 
“These products offer a tailored solution where either the advisor or client chooses the underlying asset classes and designs the payout profile to meet their specific views and financial needs.
 
“It also highlights where the financial planning industry may be heading as advisors are looking to offer individual solutions that engage their clients with a tailored solution,” he says.
 
Instreet recently won a mandate from a boutique adviser practice to construct a bespoke product based on a basket of eight US stocks covering five industry sectors.
 
Lucas says: “This reflects the need of advisors looking for products that are relevant to their clients’ portfolios.
 
“This is why advisers have shown a keen interest in our bespoke product structuring capability because it allows them to be able to offer tailored investment solutions.”

Instreet recently closed off another bespoke product based on the ASX200 that gave the investors an exposure to the ASX200 for an upfront cost which was a faction of the notional exposure to the ASX 200.

“After five years and more than $500 million in assets under management, we are now viewed as a product structure and issuer that’s backed by a professional and skilled team. It’s leveraging our capabilities for the benefit of advisers and their groups that excites us the most,” Mr Lucas says.

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Although Instreet’s five-year history has run in parallel with the fallout from the Global Financial Crisis, this fund manager has succeeded by remaining faithful to its core business proposition of listening to their customers and offering products and services that are driven by their needs and goals.

Instreet managing director George Lucas says: “We place great store on what our customers tell us. We just don’t pay lip service to what our clients say; this information becomes an integral part of our strategy for issuing products.

“For financial advisors, what we are effectively doing is acting as a conduit between them and institutions, and this has set us apart in a crowded marketplace.
 
“It has enabled us to forge close relationships with our clients, and it’s been their ongoing support that has allowed Instreet to prosper over a volatile five-year period.
 
“Certainly our business model would not have worked without the loyal support of the adviser community”
 
Instreet’s retail product suite of Link and MAST series have all been well received by SMSF investors. Its bespoke and wholesale offerings have been gaining traction with clients as an alternative to the standard investment banks channels.
 
Others services developed by Instreet include its issuing platform for bespoke products and providing independent services to investment committees. The issuing platform provides a tailored solution where clients select the underlying asset and design a payout profile to specifically meet their needs.

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Instreet Link Alternative Manager DPA product is part of the Instreet Link Series that seeks to provide investors with an opportunity to gain exposure to the price growth potential of an equally weighted basket of these alternative strategies. Exposure can be gained for a fraction of the notional exposure of the investment.  

Instreet managing director George Lucas says: “The Instreet Link Alternative Manager DPA has a low breakeven, at 1.3% a year. So the investment starts making money even with a modest increase in the basket value. It also offers known downside risk with losses limited to the initial investment amount. 

“With a relatively small one-off payment providing larger exposure, investors can add an allocation to alternative investments to their portfolio whilst maintaining the majority of their cash position, if they like” he said.  

Lonsec investment house, which has given the product a “recommended rating”, says the structure is a relatively efficient means of providing leveraged exposure to the basket of managers. It primarily suits “growth and high growth investors” and not those looking for income over the three-year period. 

The underlying strategies are managed by Aspect Capital Limited, Axiom Investment Advisors LLC and Quantica Capital AG. Aspect is a London-based manager specializing in systematic asset management, Axiom is a US-based specialist foreign currency trader, and Quantica is a Swiss-based systematic investment manager.

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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

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