Archive for the ‘Kick Out Investments’ Category

Top 10 reasons to consider kick out investment plans

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As at the end of last week, the range for the closing levels of the FTSE 100 Index over the previous 52 weeks was between 5537.0 and 6941.2, a difference of 1404.2 points. So whilst the UK’s index of leading blue chip companies remains as volatile as ever, there is one type of investment plan that continues to be a popular choice with our investors. Kick out plans offer a defined return for a defined level of risk, which combined with the opportunity to mature early mean they can offer a compelling opportunity in a wide range of investment climates.

Whilst many investors find it harder to commit when markets are seemingly more unpredictable than normal, or as has happened over the last couple of month has been on a relatively steady upwards trajectory, kick out investments remain popular regardless of what is happening to the stock market. With this in mind, we give you our Top 10 reasons to consider a kick out investment plan.

1.  Defined return, defined risk

With kick out plans the potential returns on offer, as well as what needs to happen to provide these returns, is known up front before you commit your capital – a defined return for a defined level of risk. The investor therefore has the benefit of knowing at the outset the conditions that need to be met in order to provide the stated returns. This allows the investor to consider the potential upside in the context of the amount of risk they are taking, which can then be used to make an informed decision about whether to invest or not.

2.  Early maturity

These plans have a maximum fixed term which is normally six years, but the term ‘kick out’ refers to their ability to mature early depending on the movement of the underlying investment (for example, the FTSE 100 Index). The potential to mature early is usually every 12 months after the start of the plan, with the first opportunity normally occurring at the end of year one or year two. If early maturity does occur, investors receive an attractive level of growth along with a full return of their initial capital. This structure has proved popular in all types of market conditions.

3.  Potential for high returns

In addition to the opportunity for early maturity it is no doubt the potential for high growth returns that also contribute to the ongoing popularity of kick out plans. With most plans offering high single digit or even double digit returns for each year invested (not compounded), the opportunity can be a compelling one, especially since what has to happen to the stock market in order to provide these returns is known at the very outset.

4.  Investment returns even if the market stays relatively flat

Most plans offer the ability to kick out at the end of each year provided the level of the underlying investment at that time is higher than its level at the start of the plan. So if you’re not convinced the markets will rise in the future, and yet still wish to achieve investment level returns, this can be a compelling investment story and is perhaps why this type of investment has proved particularly popular while the FTSE remains at what are historically high levels.

Click here to compare kick out investment plans »

5.  Potential to beat the market

Should a kick out plan be designed to mature early provided the level of the FTSE 100 Index (or other underlying investment) at the end of each year is higher than its value at the start of the plan, then provided the Index has gone up, even if this is by a small amount, you will receive the headline return along with a full repayment of your initial capital. In the scenario where the stock market has only risen by a very small amount, then it is likely that this type of investment would have outperformed the market. This may appeal to those investors who are not confident the market will rise significantly in the coming years, which seems to be a more popular sentiment when markets are at historically high levels.

6.  FTSE linked

Many kick out investment plans are linked to the performance of the FTSE 100 Index, which is widely recognised as the proxy benchmark for most investment managers in the UK. Since the historical volatility of this Index is familiar to many investors, they are in a better position to consider the pros and cons of the plan within the context of the underlying investment and the associated risks involved.

7.  Investment returns even if the market falls slightly

There are also kick out plans that will provide competitive growth returns even if the underlying investment falls slightly, for example up to 10% or 20%. These so called ‘defensive’ kick out plans thereby cater for an even wider range of investor views in terms of what could happen to the stock market in the coming years – the current range of defensive plans offering the potential for high growth returns even if the FTSE falls up to 20%. Again, whilst the FTSE has remained at historically high levels, this has proved to be a popular feature.

Click here to compare defensive kick out investment plans »

8.  Some capital protection from a falling market

Your original capital is returned if the plan kicks out but should this fail to occur, and no growth is achieved, typically your capital will be returned provided the underlying investment has not fallen below a certain amount. This amount is normally a percentage of its value at the start of the plan, usually in the region of 40% or 50%. To put this into context, for a plan which offers a return of capital unless the FTSE falls by more than 50%, then based on last Friday’s closing value of 6838.10, the Index would have to fall to a closing level of 3419.05 before your capital would be at risk, a level not seen since early 2003. However, if it does fall below 50% you could lose some or all of your initial capital. Please also remember that past performance is not a guide to future performance.

9.  No annual management charges

Unlike investment funds, the charges for creating and managing kick out plans are already taken into account so there are no annual management charges which come out of the headline return. The costs associated with the management of funds happens each and every year (in both actively managed and tracker funds), which may help to explain the number of funds which fail to outperform the FTSE 100 Index or other benchmark, especially over a five or six year period. This ongoing cost is not a feature of kick out plans. Most kick out investments will though have an initial charge, normally up to a maximum of 3%.

10. A disciplined approach

Finally, the mechanics of these investments removes the need for the investor to worry about when to come out of the market since the decision is made for them by the pre-determined market conditions required for the plan to mature or it simply comes to the end of the plan term. Should the plan mature, the investor then has the opportunity to reassess their options based on the market conditions at that time.

ISA friendly

All of the kick out plans offered through Fair Investment Company are available to individuals as a New ISA up to the current limit of £15,240 (2016/17 tax year) and will also accept transfers from both Cash ISAs and Stocks & Shares ISAs (as well as non-ISA investments). Since these investments are normally offered for a limited period, always note any New ISA or ISA transfer application deadlines.

Understand counterparty risk

One of the main differences with structured investment plans when compared with other types of investments, such as funds or investment trusts, is that your capital is used to purchase securities and it is these securities which are designed to produce the stated returns on offer. These securities are normally issued by a bank which means that your investment is held with a single institution rather than split between a number of companies, as it would be within an investment fund. This means the risk of the bank becoming insolvent and therefore unable to repay your original investment along with any stated returns becomes a factor to consider – this is known as counterparty risk. Since the counterparty is usually a bank, the credit rating is normally available so a view can be taken on the potential risk involved. There are also plans which aim to reduce this counterparty risk by spreading it across a number of institutions.

Latest selections

Kick out investment plans offer the potential for high returns balanced with conditional capital protection, with our latest selections offering a wide range of counterparties, collateralised versions as well as ‘defensive’ plans giving investors plenty of choice. We also have a number of kick out investments for our existing customers and those more experienced investors where you will find a range of dual Index plans which offer a higher risk versus reward, with current headline returns of up to 14% after 12 months.

 

Click here for our latest kick out investment plans »

Click here for our latest defensive kick out investments »

Click here for our experienced investor section »

 

No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.

Tax treatment of ISAs depends on your individual circumstances and is based on current law which may be subject to change in the future. Always remember to check whether any charges apply before transferring an ISA.

Kick out investment plans are structured investment plans that are not capital protected and are not covered by the Financial Services Compensation Scheme (FSCS) for default alone. There is a risk of losing some or all of your initial investment. There is a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated. In addition, you may not get back the full amount of your initial investment if the plan is not held for the full term. The past performance of the FTSE 100 Index is not a guide to its future performance.

BREXIT and the FTSE: defensive investment plans rise to the challenge

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Last updated: 11/10/2016

The recent decision made by the UK to leave the European Union has unsurprisingly forced many investors to reconsider their options, especially since there remains so much uncertainty around the potential impact of this decision on our economic growth and stability. Regardless of whether you were for remaining or leaving, taking a view on what might happen to the FTSE in the short to medium term is certainly something on the minds of many. With this in mind, we take a look at a selection of defensive investments to find out exactly what they have to offer and how the risk versus reward might be appealing for those who are concerned about the impact Brexit may have on future investment opportunities.

What is a defensive plan?

Defensive plans offer the potential for investment level returns, even if the stock market goes down, in some cases by up to 50%. Partly as a result of the FTSE continuing at historically high levels in recent years, there has been an increase in the number of plans that offer a competitive return even in the event that the market fails to rise. These are commonly known as defensive investment plans and for those who are not confident that the market will continue to rise in the medium term, they have become an increasingly popular investment opportunity.

Different types

Although each plan has its own features, collectively they are growth investments which offer the potential for either a fixed return for every year invested (not compounded), or a fixed return at the end of the full term, both of which are dependent on the performance of the underlying investment, usually the FTSE 100 Index. Each of these investments will be structured to offer a defined return for a defined level of risk, and as such you will know from the outset exactly what must happen in order to receive the stated returns on offer.

A middle ground

Defensive investments therefore try and offer the best of both worlds by offering the potential for investment level returns, even if the underlying investment only rises by a small amount, stays flat, or goes down slightly. This means they are designed for investors who have a neutral or negative outlook of what could happen to the stock market in the coming years, and yet who would still like the opportunity to receive the potential for investment level returns. Here is a selection of the current range of defensive plans on offer:

Returns even if the FTSE falls up to 10%

If the FTSE had fallen by 5% in 3 years time and yet you still received 24.0% growth plus a return of your initial capital, would you consider this a good investment? The Investec FTSE 100 Defensive Kick Out Plan has a maximum term of six years but will kick out (mature early) at the end of each year from year 3 onwards, provided the FTSE is above 90% of its value at the start of the plan. If it is, then you will receive 8.0% for each year invested (not compounded). If the Index has fallen by 10% or more, your investment continues.

If the plan does not produce a return, your initial capital is returned in full unless the Index has fallen by 50% or more, measured at the end of the plan term. If it has, your capital will be reduced by 1% for each 1% fall and so you could lose some or all of your initial investment.

Returns even if the FTSE falls up to 20%

Our next defensive plan is another kick out plan, the FTSE Defensive Kick Out from Focus, and will kick out and return your initial investment along with 7.15% for each year invested (not compounded) provided the FTSE 100 is at the required level at the end of each year, from year 2 onwards. The required level is 100% of its starting value at the end of year two, reducing by 5% in each of the following years down to 80% in the final year. So the FTSE could fall up to 20% and you would still receive 7%+ returns on your investment.

If the Index closes below the required level each year, no growth return will be paid and your initial capital will be returned in full unless the FTSE has fallen by more than 40% at the end of the term. If it has, your initial investment would be reduced by 1% for each 1% fall, and so you could lose some or all of your investment.

Returns even if the FTSE falls up to 50%

Our final defensive investment is the Investec FTSE 100 Defensive Growth Plan, which offers a fixed return of 34% at the end of the investment term provided the value of the FTSE is more than 50% of its value at the start of the plan (subject to averaging). Therefore, the FTSE can fall up to 50% and investors would still receive a 34% growth return, along with a full return of their original capital. The 34% return is equivalent to 5.0% compound annual growth.

If the Index has fallen by 50% or more at the end of the term, no growth will be achieved and your initial capital will be reduced by 1% for each 1% fall, so you could lose some or all of your initial investment.

Fair Investment view

Commenting on defensive investment plans, Oliver Roylance-Smith, head of savings and investments at Fair Investment Company said: “Despite the recent volatility in the FTSE the Index currently remains at historically high levels, but for those investors who are not confident that the market will rise in the medium term, knowing that you can achieve investment returns regardless of whether the market goes up, remains flat, or even falls slightly, could be an attractive opportunity.”

He continued: “Markets don’t like uncertainty, and so it is understandable that investors are going to consider, perhaps more than normal, the potential impact of leaving the EU on the FTSE in the medium term. Since the market can fall up to 40% before your initial investment is at risk, defensive plans also offer some capital protection against a falling market, and allow potential investors to consider the risk versus reward of the plan prior to investing, which could be appealing in the current investment climate.”

 

More information on the Investec FTSE 100 Defensive Kick Out Plan »

More information on the Focus FTSE Defensive Kick Out Plan »

More information on the Investec FTSE Defensive Growth Plan (ISA only) »

Click here to compare defensive investment plans »

 

No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.

Tax treatment depends on your individual circumstances and is based on current law which may be subject to change in the future. Always remember to check whether any charges apply before transferring an ISA.

These are structured investment plans that are not capital protected and are not covered by the Financial Services Compensation Scheme (FSCS) for default alone. There is a risk of losing some or all of your initial investment. There is also a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated. In addition, you may not get back the full amount of your initial investment if the plan is not held for the full term. The past performance of the FTSE 100 Index is not a guide to its future performance.

Investment Focus: Investec Enhanced Kick Out Plan

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Last updated: 16/08/2016

A kick out investment is a fixed term investment plan that has the ability to mature early or ‘kick out’ each year, providing a fixed growth return along with a full repayment of your initial capital. Since these plans can produce competitive returns even if the market stays relatively flat, these investments seem to be popular in a wide range of market conditions. The current issue of the Enhanced Kick Out Plan from Investec offers the highest rate of any kick out investment based on the performance of the FTSE 100 Index, which perhaps helps to explain why it is one of our most popular investments with both our existing customers as well as new investors.

Here we take a closer look at the main features of the plan and review the risk versus reward on offer to see how this might make for an attractive opportunity in the current investment climate.

In a nutshell

The plan will return 9.50% per year (not compounded) provided the value of the FTSE 100 Index at the end of each year is higher than its value at the start of the plan – so although the FTSE does have to rise, this only needs to be by a single point. Should the plan kick out, your initial investment is also returned in full. If the plan does not kick out, your initial capital is at risk if the Index falls by more than 50% during the term, and also finishes below its starting value, in which case your capital will be reduced by 1% for each 1% fall.

Early maturity

The term ‘kick out’ refers to the ability of the investment plan to mature early depending on the performance of the FTSE 100 Index. Plans such as these that have the ability to mature early and provide a competitive level of growth have proved popular in recent years with a range of investors. For example, the fact that this plan can achieve investment level returns even if the market stays relatively flat means that investors have the potential to outperform the market. This scenario may appeal to those who are not confident the market will rise strongly in the coming years.

The potential for high returns

In addition to the opportunity for early maturity it is no doubt the potential for double digit returns that have added to this plan’s popularity. The headline return on offer from the current issue is 9.50% annual growth. The return is not compounded, but will be paid to you for each year the investment has been in place, thereby offering compelling returns even if the FTSE stays relatively flat or only rises by a small amount. If the plan does kick out, your initial capital is also returned to you in full along with the growth payment.

Some capital protection from a falling market

The Enhanced Kick Out Plan also includes what is known as conditional capital protection, which means that if the plan fails to kick out by the end of the six year term, the return of your initial investment is conditional on the FTSE not falling by more than 50% of its starting value. If the FTSE stays within this 50% barrier throughout your investment then you will receive a full return of your original investment.

If the Index falls more than 50%, and also ends the term at a level which is lower than its value at the start of the plan, your initial investment will be reduced by 1% for every 1% fall. In this situation there is a risk that you could lose some or all of your capital.

Defined risk and defined returns

Another feature of this investment is that the potential returns are stated up front, prior to investing. This allows the investor to consider the potential upside in the context of the amount of risk they are taking, since you know at the outset exactly what needs to happen in order to achieve the growth returns on offer, as well as a return of your initial investment.

Risk versus reward

The principle of risk versus reward inevitably leads to putting your capital at risk in the search for potentially higher returns. A good benchmark for assessing any investment is to compare what you could get from a fixed rate deposit over a similar timeframe, and then consider whether you are comfortable with the additional risk you are taking in order to receive the potential for a higher return.

Leading longer term fixed rates are currently offering around 2.20% and so by accepting risk to your capital, you are potentially increasing your returns by around 7.30% a year if the plan matures early or produces a return in the final year. The decision is therefore whether you are comfortable with putting your capital at risk and the conditional capital protection offered, in order to have the potential for this level of growth.

Credit ratings and agencies

Another important feature of this plan is that your investment is used to purchase securities issued by Investec Bank plc and which are designed to produce the stated returns on offer based on the performance of the FTSE. This means that Investec’s ability to meet their financial obligations becomes an important consideration. Fitch is one of main global credit rating agencies and Investec Bank plc has a credit rating of BBB with a stable outlook (awarded 27th October 2015).

The ‘BBB’ rating denotes a good credit quality and indicates that expectations of default risk are currently low, although adverse business or economic conditions are more likely to impact than a bank with a higher rating. The stable outlook indicates that the rating is not likely to change in the short to medium term, i.e. in the next 6 months to 2 years.

Investec Bank plc

Investec is an international specialist bank and asset manager with its main operations in the UK and South Africa. Established in 1974, they have approximately 8,500 employees and provide a diverse range of financial products and services, specialising in a number of areas particularly within the banking sector. They are also a market leading provider of investment plans and structured deposits.

ISA friendly

In addition to non-ISA investments, this investment has been one of our most popular with ISA investors and is available as a New ISA up to the current limit of £15,240 (2016/17 tax year), and also accepts transfers from both Cash ISAs and Stocks & Shares ISAs. Please check the plan details for any application or transfer deadlines that apply. The minimum investment is £3,000.

Fair Investment conclusion

Commenting on the plan, Oliver Roylance-Smith, head of savings and investment at Fair Investment Company Limited, said: “One of the main reasons investors consider kick out investments is that they can offer the potential for high growth and a full return of capital in as little as 12 months, even if the stock market stays relatively flat or only rises by a small amount. In both of these scenarios, this type of investment offers the potential to beat the market.”

He continued: “Investec’s plan is our most popular kick out investment, offering the potential to kick out at the end of each year and achieve 10.0% growth for each year invested. So depending on your view of what will happen to the FTSE in the coming years, the potential for double digit growth along with a full return of capital, could be considered a good return on your investment in the current climate.”

Click here for more information about the Investec Enhanced Kick Out Plan »

 

No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek professional advice.

Tax treatment of ISAs depends on your individual circumstances and is based on current law which may be subject to change in the future. Always remember to check whether any charges apply before transferring an ISA.

This is a structured investment plan that is not capital protected and is not covered by the Financial Services Compensation Scheme (FSCS) for default alone. There is a risk of losing some or all of your initial investment. There is a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated. In addition, you may not get back the full amount of your initial investment if the plan is not held for the full term. The past performance of the FTSE 100 Index is not a guide to its future performance.

Defensive investment plans revealed – what you need to know

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Defensive plans offer the potential for investment level returns even if the stock market fails to rise, or, in some scenarios, even falls slightly. With the closing levels of the FTSE 100 Index (‘the FTSE’) remaining above 6,000 points for almost the entire period since the start of 2013, defensive plans have risen in popularity as investors who are not confident the markets will rise further still have the opportunity to produce a competitive return on their capital. With this in mind, we take a closer look at a selection of our defensive plans to find out exactly what they have to offer and how the risk versus reward might be appealing in the current investment climate.

FTSE levels

Apart from a handful of days during August and September of this year, the FTSE has closed above 6,000 points since the start of 2013. The lowest level was on 24th August this year when the Index closed at 5,898 points whilst the highest closing level over this period was 7104 towards the end of April this year. This level also represents the highest closing level of the FTSE on record, having broken through the 7,000 point barrier for the first time only in March earlier this year.

What is a defensive plan?

Therefore, by historical standards, the FTSE has spent close to three years at what are historically high levels. Partly as a result of this, there has been an increase in the number of plans that offer the potential for investment returns, even if the event that the market fails to rise. Collectively, these are commonly known as defensive plans.

Different types

Although each plan has its own characteristics, collectively they are growth investments which offer the potential for either a fixed return for every year invested (not compounded), or a multiple in any rise in the underlying investment but starting from a lower initial level (normally with a cap on the maximum growth return on offer).  Each of these investments will be structured to offer a defined return for a defined level of risk, and as such you will know from the outset exactly what must happen in order to receive the stated returns on offer.

A middle ground

Defensive investments therefore try and offer the best of both worlds by offering the potential for investment level returns, even if the underlying investment only rises by a small amount, stays flat, or with some plans even goes down slightly. This means they are designed for investors who have a neutral or negative outlook of what could happen to the stock market in the coming years, and yet who would still like the opportunity to receive the potential for investment level returns. With the FTSE at historically high levels, these could arguably offer a compelling investment opportunity.

Please note that past performance of the FTSE 100 Index is not a guide to its future performance.

Potential for enhanced returns – the defensive ‘supertracker’

The FTSE Defensive Supertracker from Meteor is a current example of the defensive supertracker. The ‘supertracker’ part means your investment tracks any growth in the FTSE 100 Index during the term of the plan and then triples it, whilst the plan is ‘defensive’ since this growth is based on any rise above 80% of the FTSE’s starting value.  Therefore, provided the FTSE has not fallen by more than 20%, you will receive triple any growth, subject to a maximum return of 60%, plus your capital back (that’s a 60% return even if the FTSE ends the same).

If the FTSE has fallen by more than 20%, no growth will be paid and your original investment will be returned in full unless the FTSE has fallen by more than 40%. This investment could therefore offer a compelling risk versus reward for those who are not convinced the FTSE will rise significantly in the medium term. However, if the FTSE has fallen by more than 40%, your capital will be reduced by 1% for each 1% fall, so you could lose some or all of your initial investment.

Benefit from early maturity – the defensive kick out

If the FTSE had fallen by 5% in 3 years time and yet you still received 24% growth plus a return of your initial capital, would you consider this a good investment? Our range of defensive kick out plans offer up to 8.0% for each year invested (not compounded), even if the market falls up to 10%. The plans also offer the opportunity to mature early or kick out, as early as year 2 onwards, with different FTSE levels required depending on the individual plan.

The Investec FTSE 100 Defensive Kick-Out Plan will return 8.0% for each year plus a return of your capital provided the level of the FTSE at the end of each year from year 3 onwards, is above 90% of its starting value at the start of the plan. Meteors’ FTSE Defensive Kick Out Plan offers a marginally lower return of 7.75% in the event of kicking out but can mature at the end of year 2 onwards.

If with these plans the FTSE falls below the required level for each year, no growth will be achieved and you initial investment is returned in full unless the Index has fallen by either 40% or 50% (depending on the plan), measured at the end of the plan term. If it has, your capital will be reduced by 1% for each 1% fall and so you could lose some or all of your initial investment.

The potential for higher returns

Finally, the potential for higher returns is available if investors are prepared to take a higher level of risk, by having their return dependent on a small number of shares rather than an Index as a whole.  Mariana’s 3 Stock Defensive Consolation Plan offers the potential for 14.5% annual returns, as well as the opportunity to mature early, or ‘kick out’, after 12 months, and then after every six months thereafter.

The plan compares the value of three technology shares (Apple, Microsoft and Intel) at the start of the plan with their values at the end of the first year, and then each six months thereafter. If the values of all three shares are at or above their starting values your investment will end, returning your original capital plus 7.25% for each six months invested (not compounded). If one or more shares are below, the plan continues.

If the plan reaches the end of the six year term without kicking out, it also offers the opportunity for a ‘consolation’ return of 32% provided none of the shares has fallen by more than 50%. If one or more shares have fallen by more than 50% then no return will be paid and your initial capital will be reduced by 1% for each 1% fall of the lowest performing share, so you could lose some or all of your initial investment.

Fair Investment view

Commenting on the plans, Oliver Roylance-Smith, head of savings and investments at Fair Investment Company said: “Whilst markets remain at relatively high levels there is understandably a place for defensive investment plans. For those investors who are not confident that the market will rise by a healthy margin in the coming years, knowing that you can achieve 7%+ for each year invested regardless of whether the market goes up, remains flat, or even falls slightly, could be an interesting option.”

He continued: “Combining a competitive growth return with a full return of your initial capital unless the underlying investment falls by 40% or 50% also offers investors a defined return for a defined level of risk. This gives investors the ability to consider the risk versus reward of the plan prior to investing which could be appealing in light of the current investment climate.”

More information on the Meteor FTSE Defensive Supertracker Plan »

More information on the Investec FTSE 100 Defensive Kick Out Plan »

More information on the Meteor FTSE Defensive Kick Out Plan »

More information on the Mariana 3 Stock Defensive Consolation Kick Out Plan »

Click here to compare defensive investment plans »


No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.

Tax treatment depends on your individual circumstances and is based on current law which may be subject to change in the future. Always remember to check whether any charges apply before transferring an ISA.

These are structured investment plans that are not capital protected and are not covered by the Financial Services Compensation Scheme (FSCS) for default alone.  There is a risk of losing some or all of your initial investment due to the performance of the FSTE 100 Index or three shares listed on the NASDAQ Index. There is also a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated. In addition, you may not get back the full amount of your initial investment if the plan is not held for the full term. The past performance of the FTSE 100 Index or any shares listed on the NASDAQ is not a guide to their future performance. As share prices can move by a wide margin plans based on the performance of shares represent a higher risk investment than those based on indices as a whole.

Investment Focus: Mariana 3 Stock Defensive Consolation Kick Out Plan

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With the potential for a high headline growth return, the latest version of this popular plan from Mariana offers those investors with a higher risk appetite, the potential for greater reward. In addition, this innovative investment plan combines the ability to mature early or ‘kick out’, along with the opportunity for a ‘consolation’ fixed return if the plan fails to mature. Here we take a closer look at the plan’s main features in order to better understand the risk versus reward on offer.

Plan snapshot

The 3 Stock Defensive Consolation Kick Out Plan has a maximum term of six years but offers the opportunity to mature early, or ‘kick out’, after just 12 months, and then at the end of each six months thereafter, dependent on the performance of three technology shares. If the plan kicks out, you will receive 14.50% at the end of year one, or 14.50% plus an additional 7.25% for each six months thereafter (not compounded). If the plan fails to kick out, there is also the opportunity for a ‘consolation’ return of 32% at the end of the fixed term, whilst the return of your capital is also dependent on the performance of the same three shares with your capital being at risk if any of them has fallen by more 50% at the end of the term, in which case you could lose some or all of your initial investment.

‘3 Stock’

Both the investment growth and the return of your initial capital are dependent on the performance of 3 shares. The three shares are well known technology businesses Apple Inc, Microsoft Corp and Intel Corp, all of which are listed on the NASDAQ stock exchange, the second largest stock exchange in the world. The closing levels of the shares are taken at the start of the plan and are then measured at regular intervals thereafter, known as kick out observation dates.

‘Kick Out’

The term ‘kick out’ refers to the ability of the plan to mature early, before the end of the maximum fixed term, or at the end of the plan, i.e. on any of the kick out observation dates, the first occurring after 12 months, and then every six months thereafter. On any such date, should all three shares be at or above the required level, the plan will kick out. If one or more of the shares end below the required level, the plan continues to the next observation date.

‘Defensive’

In determining whether the plan will kick out or not, the value of each share is taken at each kick out observation date and then compared with its value at the start of the plan. Should the value of all three shares be at or above 90% of their value at the start of the plan, your investment will kick out providing a 14.50% return at the end of year one, or 14.50% plus 7.25% for each additional six months invested thereafter (not compounded). This growth payment is made along with a return of your initial investment. The ‘defensive’ element to the plan refers to each share being able to fall up to 10% and the plan will still provide the investment return.

‘Consolation’ return

If the investment fails to kick out either during the plan or at the end of the fixed term, there is also the opportunity to receive a 32% fixed return, along with a return of your initial investment. This ‘consolation’ return is paid provided none of the shares has fallen by more than 50%, i.e. all three shares must end at or above 50% of their value at the start of the plan. If one or more shares have fallen by more than 50%, your capital is at risk.

Some capital protection from falling share prices

If the plan fails to kick out the return of your initial capital is also dependent on the same three shares. On the final day of your investment, should the value of the lowest performing share be less than 50% of its value at the start of the plan, your initial capital will be reduced by 1% for each 1% fall. If should be noted that in this situation, you would lose at least 50% of your initial capital, so although the 50% barrier provides some capital protection from falling share prices, there is the risk that you could lose some or all of your initial capital.

Higher risk

Therefore, the most important feature of this investment plan to consider is that the potential returns on offer, as well as what happens to your initial investment, are both dependent on the performance of shares rather than any stock market index. This makes it a higher risk investment as your growth return is dependent on the performance of individual shares rather than a broader exposure to the stock market as a whole offered by an index (such as the NASDAQ). In addition, this plan focuses on shares within the technology sector which can be volatile. These two factors should be carefully considered.

Greater rewards

The principle of risk versus reward means that the upside of taking on more risk is that the potential rewards are greater, which is indeed the case with this investment. The headline returns are high compared to those on offer from other kick out investments based on the performance of stock market indices. This investment therefore offers the potential for greater rewards than would be on offer if the plan was dependent on the performance of the NASDAQ Index.

Back testing: how the plan would have performed historically

Back testing is statistical research which uses hypothetical products with identical terms to this investment plan and considers how they would have performed over a 15 year period had they been launched since October 1994, giving a total of 3,915 different hypothetical products. This analysis shows that a kick out occurred in 81.2% of scenarios, did not occur but investors received a full return of capital in 13.8% of scenarios and at least 50% of investor’s initial capital was lost in the remaining 5.0% of occasions.

Please note that this analysis is simulated and has no bearing on how this plan will perform in the future, actual performance may produce significantly different results. It is not a reliable indicator of future performance and should not be used to assess the risks associated with the plan.

Commerzbank as counterparty

Structured investment plans use your investment to purchase securities issued by Commerzbank and so their ability to be able to meet their financial obligations becomes an important consideration. This is known as counterparty risk (or credit risk) and means that in the event of Commerzbank going into liquidation, you could lose some or all of your initial investment as well as the payment of any growth return. In this event you would not be entitled, for this reason alone, to compensation from the Financial Services Compensation Scheme (the ‘FSCS’).

Credit ratings and agencies

One accepted method of determining the credit worthiness of a counterparty is to look at credit ratings issued and regularly reviewed by independent companies known as ratings agencies. Standard and Poor’s is a leading credit ratings agency and as at 19th October 2015, Commerzbank has been attributed a ‘BBB+‘ rating with a negative outlook. The ‘BBB’ rating denotes a good capacity to meet its financial commitments and repay debts but could be more susceptible to adverse economic conditions than companies in higher-rated categories, whilst the ‘+’ signifies it is at the higher end of the rating grade. The negative outlook indicates that the rating may be lowered in the short to medium term (between 6 months to 2 years).

ISA friendly

In addition to non-ISA investments, this plan also accepts Cash ISA and Stocks & Shares ISA transfers as well as New ISA investments (current tax year limit of £15,240). The minimum investment is £15,000.

Fair Investment conclusion

Oliver Roylance-Smith, head of savings and investments at Fair Investment Company, commented on the plan: “The headline returns on offer from this plan are some of the highest currently available from any kick out investment. But with the potential for such high investment returns it is crucial that investors look carefully at the risks involved. For example, any growth return is dependent on the performance of three NASDAQ-listed shares and is therefore higher risk than a plan based on the NASDAQ Index, whilst the technology sector can be volatile. These should be key considerations. Investors should also note that all three shares need to meet the required level for the plan to produce an investment return.”

In conclusion, he said: “This plan may however appeal to investors prepared to take on a higher level of risk in return for higher potential rewards, whilst the 32% consolation return provides an innovative addition, and the 50% barrier offers some protection against falling share prices.”

Click here for more information about the plan »

 

No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek professional advice.

Tax treatment depends on your individual circumstances and is based on current law which may be subject to change in the future. Always remember to check whether any charges apply before transferring an ISA.

This is a structured investment plan that is not capital protected and is not covered by the Financial Services Compensation Scheme (FSCS) for default alone. Any return on your investment is not guaranteed and as shares prices can move by a wide margin plans based on the performance of shares represent a higher risk investment than those based on indices as a whole. There is a risk of losing some or all of your initial investment due to the performance of three shares listed on the NASDAQ Index. There is a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated. In addition, you may not get back the full amount of your initial investment if the plan is not held for the full term. The past performance of shares listed on the NASDAQ is not a guide to their future performance.

How to achieve 10%+ growth returns, even if the market goes down

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Last updated: 05/01/2016

Although there are many reasons why investors ultimately decide to go ahead and invest or not, timing the stock market is one of the most commented areas in investor behaviour. So what market conditions lead us to consider whether now is the right time to invest or not? Perhaps two of the most common are when markets are trading at historically high levels, and when markets are particularly volatile. Therefore should both of these market conditions prevail at the same time, which we have experienced during 2015, then the self-questioning around whether to invest can increase significantly.

With this in mind, we take a look at a selection of investments that can still achieve 10%+ growth returns, even if the underlying investment has only risen by a very small amount or, in some cases, has even gone down slightly.

Popular in all markets?

By combining the ability to produce high growth returns, along with some capital protection against a falling market, these kick out investment plans offer a fairly unique blend of risk versus reward which has the potential to appeal to investors in a wide range of prevailing investment conditions. Although notably this type of investment has proved popular when markets are low (on the basis that the investor considers it more likely that the index will rise), these plans have also generated particular interest when markets are at historically high levels, as they have been for periods during 2015.

The potential for high returns

Whenever investors are considering when to invest and where to put their capital, perhaps the most appealing feature is the potential return on offer. All of the investments covered below offer a minimum of 10% for each year invested (not compounded). On the basis that a 7% return on your capital could be considered an investment level return, these are considered to offer the potential for high growth returns.

Example – potential 10.0% after just 12 months…

“The FTSE/STOXXX Defensive Kick Out Plan from Focus offers 10.0% for each year invested (not compounded) provided the value of the FTSE 100 Index and the Euro STOXX 50 Index (made up of the 50 leading blue chip companies in the Eurozone) are at or above a specified level at the end of each year. If either or both Indices close below the required level each year, no growth return will be paid and your capital is at risk if one or both Indices has fallen by more than 40% at the end of the plan, in which case you could lose some or all of your investment.

Depending on your view of the UK and European markets, this plan could offer a compelling combination of high growth potential along with some capital protection should markets fall.”

Click here for more info »

 

Returns even if the market stays relatively flat

Many kick out investments are designed to provide returns even if the market has stayed relatively flat. This means that even if the stock market has only gone up by a small amount, you would still receive the full growth return. So if you’re not convinced the markets will rise in the future and yet still wish to achieve double digit returns, the opportunity to beat the stock market in conditions such as these could be a compelling investment story, and perhaps helps to explain why this type of investment has proved particularly popular with our investors.

Example – potential 10.0% even if the FTSE only rises a little

“The Enhanced Kick Out Plan from Investec will return 10.0% for each year invested (not compounded) provided the value of the FTSE 100 Index at the end of each plan year is higher than its value at the start of the plan (subject to averaging). If the FTSE is lower at the end of every year, no growth will be achieved and your initial investment is returned in full unless the FTSE 100 Index falls by more than 50% during the term, in which case you could lose some or all of your initial investment.

This plan is one of our best selling growth investments and the potential 10.0% on offer from this latest issue is its highest headline return seen since the start of 2013.”

Click here for more info »

 

Double digit returns even if markets fall slightly

There are also a number of kick out plans that will provide double digit growth returns even if the underlying investment(s) falls slightly, for example up to 15% or 20%. These so called ‘defensive’ kick out plans thereby cater for a wider range of investor views as to what could happen to the stock market in the coming years. Whilst stock markets remain at what are historically still relatively high levels, this can prove to be a popular feature.

Example – potential 12.0% each year, even if markets fall up to 20%

“The Investec Dual Index Step Down Kick-Out Plan offers 12.0% for each year invested (not compounded) provided the value of the FTSE 100 Index and the Euro STOXX 50 Index (made up of the 50 leading blue chip companies in the Eurozone) are above a specific level at the end of each year, compared to their values at the start of the plan. The required levels are 100% at the end of year two, reducing by 5% each year thereafter down to 80% in the final year.

If either or both Indices close below the required level each year, no growth return will be paid and your initial investment will be returned in full unless one or both Indices has fallen by more than 50% during the term of the plan. If this does occur, your capital is at risk depending on the worst performing Index and so you could lose some or all of your investment.”

Click here for more info »

 

Some capital protection from a falling market

When comparing the risk versus reward of any investment it is important to understand the circumstances when your initial capital could be lost. With kick out investments your original capital is returned if the plan kicks out, but should this not occur then typically your capital will be returned provided the underlying investment has not fallen below a certain amount, normally a percentage of its value at the start of the plan.

To put this into context, for a plan which offers a return of capital unless the FTSE falls by more than 50%, then based on this morning’s (27/10/2015) opening value of 6,471.0, the Index would have to fall to a closing level of 3,235.5 before your capital would be at risk, a level not seen since 1995. However, if it does fall below 50% you could lose some or all of your initial capital. Please also remember that past performance is not a guide to future performance.

Understanding counterparty risk

One of the main differences with structured investment plans when compared with other types of investments, such as funds or investment trusts, is that your capital is used to purchase securities and it is these securities which are designed to produce the stated returns on offer. These securities are normally issued by a bank which means that your investment is held with a single institution rather than split between a number of companies, as it would be within, for example, an investment fund.

This means the risk of the bank becoming insolvent and therefore unable to repay your original investment along with any stated returns becomes a factor to consider – this is known as counterparty risk. Since the counterparty is usually a bank, the credit rating is normally available so a view can be taken on the potential risk involved. There are also plans which aim to reduce this counterparty risk by spreading it across a number of institutions.

Defined return, defined risk

One of the main features of kick out investments is that the potential returns on offer are stated up front, and so are known before you commit your capital. This allows the investor to consider the potential upside in the context of the amount of risk they are taking, since you know at the outset exactly what needs to happen in order to achieve any stated returns as well as a return of your initial investment. This can then be used to make an informed decision about whether to proceed or not by comparing the defined return and defined risk with alternative investments.

Fair Investment view

Commenting on kick outs as a potential plan to consider, Oliver Roylance-Smith, head of savings and investment at Fair Investment Company Limited, said: “With markets continuing to make investors think very carefully before committing their capital, kick out plans have proved to be a popular choice by offering an often compelling balance of risk versus reward”.

He continued: “Although they should be considered fixed term plans, the opportunity to mature early, sometimes in as little as 12 months, is clearly an appealing feature for both savers and investors. Combined with the potential for high investment returns, even if the market stays relatively flat or in some cases even goes down, and it is understandable why this type of investment could be seen as an attractive opportunity in any investment climate, but especially when markets continue to trade at historically high levels.”

Latest selections

Click here for the latest kick out investments »

Click here for the latest defensive kick out investments »

Click here for our experienced investor section »

 

No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.

Tax treatment depends on your individual circumstances and is based on current law which may be subject to change in the future. Always remember to check whether any charges apply before transferring an ISA.

Kick out investment plans are structured investment plans that are not capital protected and are not covered by the Financial Services Compensation Scheme (FSCS) for default alone. There is a risk of losing some or all of your initial investment. There is also a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated. In addition, you may not get back the full amount of your initial investment if the plan is not held for the full term. The past performance of individual shares, the FTSE 100 Index and the EURO STOXX 50 Index is not a guide to their future performance.

Top 10 reasons to consider Kick Out investment plans now

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Last updated: 10/11/2015

Whilst the stock market remains as volatile as ever, there is one type of investment plan that continues to be a popular choice with our investors. Kick out plans offer a defined return for a defined level of risk, which combined with the opportunity to mature early seems to make them particularly sought after in the current climate. Whilst many investors find it harder to commit when markets are seemingly more unpredictable than normal, we have seen a recent increase in the number of new investments into this type of plan and since they are available as a capital protected deposit or a capital at risk investment, have become popular with both savers and investors. With this in mind, we give you our Top 10 reasons to consider a kick out plan.

Defined return, defined risk

With kick out plans the potential returns on offer as well as what needs to happen to provide these returns is known up front, before you commit your capital – a defined return for a defined level of risk. The investor therefore has the benefit of knowing at the outset the conditions that need to be met in order to provide the stated returns. This can be used to make an informed decision about whether to invest or not.

Early maturity

These plans have a maximum fixed term or normally six years, but the term ‘kick out’ refers to their ability to mature early depending on the movement of the underlying investment, such as the FTSE 100 Index. Plans that have the ability to mature early thereby providing an attractive level of growth along with a full return of your initial capital have proved popular with investors in all types of markets.

Potential for high returns

In addition to the opportunity for early maturity it is no doubt the potential for high growth returns that contribute to the ongoing popularity of kick out plans. With a number of plans offering the potential for double digit returns for each year invested (not compounded), the opportunity can be a compelling one, especially since what has to happen to the markets in order to provide these returns is known at outset.

Return on investment even if the market stays flat

A small number of plans offer returns only if the market goes up slightly but the majority offer the potential for a competitive growth return (up to 10.0%) even if the stock market stays the same. So if you’re not convinced the markets will rise in the future and yet still wish to achieve stock market level returns, this could be a compelling investment story and is perhaps why this type of investment has proved particularly popular while the FTSE still remains at what are historically high levels.

Click here to compare kick out investment plans »

Potential to beat the market

Should a kick out plan be designed to mature early provided the level of the FTSE 100 Index (or other underlying investment) at the end of each year is higher than its value at the start of the plan, then provided the Index has gone up, even if this is by a small amount, you will receive the headline return along with a full repayment of your initial capital. If the stock market had only risen by a very small amount then it is likely that this type of investment would have outperformed the market.

Investment level returns even if the market falls slightly

There are also kick out plans that will provide competitive growth returns even if the underlying investment falls slightly, for example up to 10% or 15%. These so called ‘defensive’ kick out plans thereby cater for a wider range of investor views as to what could happen to the stock market in the coming years. With current plans offering the potential for double digit returns, and whilst the FTSE has remained at historically high levels, this has proved to be a popular feature.

Click here to compare defensive kick out investment plans »

Some capital protection from a falling market

Your original capital is returned if the plan kicks out but should this not occur, typically your capital will be returned provided the underlying investment has not fallen below a certain amount, which is normally a percentage of its value at the start of the plan. To put this into context, for a plan which offers a return of capital unless the FTSE falls by more than 50%, then based on this morning’s opening value of 5,958.9, the Index would have to fall to a closing level of 2,979.5 before your capital would be at risk, a level not seen since 1995. However, if it does fall below 50% you could lose some or all of your initial capital. Please also remember that past performance is not a guide to future performance.

Fully capital protected options

Some kick out plans are also available with full capital protection, known as structured deposits. These therefore offer the potential for returns which are higher than those currently available from the more traditional fixed rate bond as well as Financial Services Compensation Scheme eligibility up to the prevailing deposit limits (currently £85,000 per individual per institution, reducing to £75,000 from 1st January 2016 onwards). However, it should be remembered that unlike fixed rate bonds the returns on these are not guaranteed.

Click here to compare capital protected kick out plans »

No annual management charges

Unlike investment funds, the charges for creating and managing kick out plans are already taken into account so there are no annual management charges which come out of the headline return. The costs associated with the management of funds happens each and every year (in both actively managed and tracker funds), which may help to explain the number of funds which fail to outperform the FTSE 100 Index or other benchmark, especially over a five or six year period. This ongoing cost is not a feature of kick out plans. Most kick out investments will though have an initial charge, normally up to a maximum of 3%.

Tax efficient – New ISA friendly

In addition to non-ISA investments, all of the kick out plans offered through Fair Investment Company are available to individuals as a New ISA up to the current limit of £15,240 (2015/16 tax year) and will also accept transfers from both Cash ISAs and Stocks & Shares ISAs. Please note that the tax treatment of ISAs depends on your individual circumstances and legislation which are subject to change in the future.

Understand counterparty risk

One of the main differences with structured investment plans when compared with other types of investments, such as funds or investment trusts, is that your capital is used to purchase securities and it is these securities which are designed to produce the stated returns on offer. These securities are normally issued by a bank which means that your investment is held with a single institution rather than split between a number of companies, as it would be within an investment fund. This means the risk of the bank becoming insolvent and therefore unable to repay your original investment along with any stated returns becomes a factor to consider – this is known as counterparty risk. Since the counterparty is usually a bank, the credit rating is normally available so a view can be taken on the potential risk involved. There are also plans which aim to reduce this counterparty risk by spreading it across a number of institutions.

Fair Investment view

Commenting on kick outs as a potential plan to consider, Oliver Roylance-Smith, head of savings and investment at Fair Investment Company Limited, said: “With markets continuing to make investors think very carefully before committing their capital, kick out plans have proved to be a popular choice by offering an often compelling balance of risk versus reward”.

He continued: “Although they should be considered fixed term plans, the opportunity to mature early, sometimes in as little as 12 months, is clearly an appealing feature for both savers and investors. Combined with the potential for high investment returns, even if the market stays relatively flat or in some cases even goes down, and it is understandable why this type of investment could be seen as an attractive opportunity in any investment climate, but especially when markets continue to trade at historically high levels.”

Latest selections

Kick out investment plans offer the potential for high returns balanced with conditional capital protection, with our latest selections offering a wide range of counterparties, collateralised versions as well as ‘defensive’ plans giving investors plenty of choice. We also have a number of kick out investments for our existing customers and those more experienced investors where you will find a range of dual Index plans which offer a higher risk versus reward, with current headline returns of up to 15% after 12 months.

Click here for the latest kick out investments »

Click here for the latest defensive kick out investments »

Click here for the latest kick out deposit plans »

Click here for our experienced investor section »

 

No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.

Tax treatment depends on your individual circumstances and may change. Make sure you check whether any charges apply prior to transferring any existing investment.

Although structured deposit plans are capital protected there is a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated. In this event you may be entitled to compensation from the Financial Services Compensation Scheme (FSCS), depending on your individual circumstances. In addition, you may not get back the full amount of your initial investment if the plan is not held for the full term. The past performance of the FTSE 100 Index is not a guide to its future performance.

Kick out investment plans are structured investment plans that are not capital protected and are not covered by the Financial Services Compensation Scheme (FSCS) for default alone. There is a risk of losing some or all of your initial investment. There is a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated. In addition, you may not get back the full amount of your initial investment if the plan is not held for the full term. The past performance of the FTSE 100 Index is not a guide to their future performance.

Investment Focus: Mariana 10:10 Twin Option FTSE Kick Out Plan

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Potential 10% each year for up to 10 years

Depending on which of the two investment options is selected, this new launch from Mariana offers investors the potential for either 10.0% or 12.5% per year, both dependent on the performance of the FTSE 100 Index. In addition, the plan offers the ability to mature early or ‘kick out’ each year from the end of year three onwards and is the first plan of its kind to extend the maximum term to 10 years, hence the plan name. With the potential for such high headline returns from a plan based on the FTSE only, we take a closer look at how this new investment plan works in order to better understand the risk versus reward.

New launch

Fixed term investment plans that have the ability to mature early each year are commonly known as ‘kick out’ plans. These plans are popular with investors in all market conditions but seem to gain increased interest when the stock market is at historically high levels since they are often structured in a way that can produce investment level returns even if the market stays relatively flat – and this is exactly what the latest launch offers investors.

Plan snapshot

The 10:10 Twin Option FTSE Kick Out Plan offers the potential for double digit growth on your capital depending on the performance of the FTSE 100 Index. Investors have two options, the difference between them being the level the Index has to reach in order for the plan to make a growth payment along with a return of your original investment.

For those targeting the higher return of 12.5% each year (not compounded), the FTSE must end the year 10% or more higher than its value at the start of the investment whilst the required level of the Index reduces to the same or higher for the lower headline return of 10.0%. If the plan does not kick out at all, the return of your initial capital is also dependent on the FSE 100 Index with your capital put at risk if the Index at the end of the investment term is more than 30% lower than its value at the start of the plan, in which case your capital will be reduced by 1% for each 1% fall.

The potential for high returns

In addition to the opportunity for early maturity it is no doubt the potential for double digit returns that will add to this plan’s popularity, especially since despite its recent falls, the FTSE still remains at what are historically high levels. The return is not compounded, but will be paid to you for each year the investment has been in place, thereby offering compelling returns, and if the Index stays relatively flat or only rises by a small amount, offers the potential to beat the current stock market. If the plan does produce an investment return, your initial capital is also returned to you in full along with the growth payment.

‘Kick out’

The term ‘kick out’ refers to the ability of the investment plan to mature early depending on the movement of the FTSE 100 Index. The 10:10 Twin Option FTSE Kick Out Plan has the potential to mature at the end of each year from year three onwards, provided the value of the Index meet one of the required levels, depending on which option you invest in.

FTSE 100 Index

Plans linked to the FTSE 100 Index provide a potential return against what is widely recognised as the proxy benchmark for most investors and investment managers. Since the historical volatility is familiar to many investors, they are in a better position to consider the pros and cons of the plan within the context of the underlying investment. Plans which offer double digit returns are often linked to the performance of a small number of shares listed on the FTSE rather than the broader exposure to the UK stock market offered by the Index.

Dual Option

The required level the FTSE 100 Index has to meet in order to provide an investment return depends on which option is selected. Investment option two which offers the higher headline return of 12.5% growth each year (not compounded), requires the level of the Index to be at least 10% higher than its level at the start of the plan. Investment option one offers a potential 10.0% a year (not compounded) with the required level simply being the same or higher than its level at the start of the plan – this means the Index can remain flat and you would still receive double digit returns… Investors can also split their investment between the two options provided the total invested meets the minimum £5,000.

Investment term – breaking new ground…

The plan has broken new ground in that the maximum term is set at 10 years rather than the more common five or six years of most structured investment plans. This could be seen as an advantage over the shorter terms for those investors who would prefer to stay invested should we experience a market downturn in anticipation of markets recovering with the potential for a double digit return to compensate.

Although the plan can be encashed prior to the end of the term, the proceeds you receive will depend on a number of market factors and could mean that you may receive less than your initial investment. Since the investment is designed to be held for the full term it should only be considered by those who are able to invest their capital for ten years.

Some capital protection from a falling market

Should the plan provide a growth payment then this is made along with a full return of your initial investment. However, if the plan runs the full 10 years and fails to provide any growth, the return of your initial capital is conditional on the FTSE 100 Index not falling by more than 30% of its value at the start of the investment. This is known as conditional capital protection and with this plan is measured at the end of the investment term only. Provided the Index has not fallen below this level, you will receive a return of your initial capital but if it has, your initial investment will be reduced by 1% for every 1% fall in the FTSE, so you could lose some or all of your capital. In this situation you would lose at least 30% of your initial capital.

Back testing: how the plan would have performed historically

Back testing is statistical research which uses hypothetical products with identical terms to this investment plan and considers how they would have performed over a 15 year period had they been launched since August 1994, giving a total of 3,781 different hypothetical products. This analysis shows that for investment option one a kick out did not occur 4.49% of the time and that at least 30% of the initial investment was lost in 0.56% of occasions. For investment option two, a kick out did not occur in 13.94% of cases and at least 30% of the initial investment was lost in 2.88% of cases.

Please note that this analysis is simulated and has no bearing on how this plan will perform in the future, actual performance may produce significantly different results. It is not a reliable indicator of future performance and should not be used to assess the risks associated with the plan.

Societe Generale as counterparty

Unlike an investment fund, this plan uses your investment to purchase securities issued by Societe Generale and so their ability to be able to meet their financial obligations become an important consideration. This is known as counterparty risk (or credit risk) and means that in the event of Societe Generale going into liquidation, you could lose some or all of your initial investment as well as the payment of any growth return. In this event you would not be entitled, for this reason alone, to compensation from the Financial Services Compensation Scheme (the ‘FSCS’).

Credit ratings and agencies

One accepted method of determining the credit worthiness of a counterparty is to look at credit ratings issued and regularly reviewed by independent companies known as ratings agencies. Standard and Poor’s is a leading credit ratings agency and as at 25th August 2015, Societe Generale has been attributed an ‘A‘ rating with a negative outlook. The ‘A’ rating denotes a strong capacity to meet its financial commitments but could be more susceptible to adverse economic conditions than companies in higher-rated categories. The negative outlook indicates that the rating may be lowered in the short to medium term (between 6 months to 2 years).

Defined risk and defined returns

One of the features of this investment is that the potential returns are stated up front, prior to investing. This allows the investor to consider the potential upside in the context of the amount of risk they are taking since you know at the outset exactly what needs to happen in order to receive the returns as well as a return of your initial investment.

ISA friendly

We expect this investment to be popular with both non-ISA and ISA investors. The plan is available as a New ISA up to the current limit of £15,240, and also accepts transfers from both Cash ISAs and Stocks & Shares ISAs. The minimum investment is £5,000 which can be split across the two investment options.

Fair Investment conclusion

Oliver Roylance-Smith, head of savings and investments at Fair Investment Company, commented on the plan: “The headline returns on offer from this plan are some of the highest currently available from a kick out investment linked to the performance of the FTSE 100 Index. With the FTSE recently closing below 6,000 for the first time since 2012, investors may see this as a good time to invest in a plan that offers high growth returns even if the market stays flat, whilst the extension to a 10 year maximum term may offer some reassurance to investors who consider a market downturn could affect the return on their investment.”

Past performance of the FSTE 100 Index is not a guide to its future performance.

The plan is open now for new ISA investments (maximum £15,240), ISA transfers and non-ISA investments.


Click here for more information about the Mariana 10:10 Twin Option FTSE Kick Out Plan »

 

No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek professional advice. Tax treatment depends on your individual circumstances and may change. ISA transfer charges may apply, please check with provider.

This is a structured investment plan that is not capital protected and is not covered by the Financial Services Compensation Scheme (FSCS) for default alone. Returns are not guaranteed and there is a risk of losing some or all of your initial investment due to the performance of the FTSE 100 Index. There is a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated. In addition, you may not get back the full amount of your initial investment if the plan is not held for the full term. The past performance of the FTSE 100 Index is not a guide to its future performance.

Experienced investors – our latest selections…

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Updated: 29/09/2015

Here at Fair Investment Company there are a large number of our investors who decide to invest through us again and again. Some of our reviews tell us that this has something to do with our excellent customer service and the quality and relevance of our wide range of savings and investment products. This is also why in late 2012, we launched our experienced investor section. Here we take another look at what is driving more and more new and existing investors to these innovative investment ideas as well as give you some of our current income and growth selections.

Existing investors – the inspiration

As a company, we have always looked at ways of providing innovative savings and investment ideas, which has often led to offering alternative opportunities alongside more traditional ways to save and invest. Initially inspired by a growing number of existing investors who were seeking new investment ideas, our experienced investor section is now in its third year and continues to enhance our overall offering by featuring a range of innovative investment products.

Fixed term investments

Many of our investors, both new and existing decide that an investment with a fixed term is the right way forward. This is why our most popular type of investment is the structured investment plan. These plans offer a defined return for a defined level of risk, thereby offering a more predetermined level of risk versus reward than the better known investment fund. The return on offer is usually dependent on the performance of the stock market with the majority of plans being linked to an investment index such as the FTSE 100 Index, or a small number of listed shares, normally well known FTSE 100 shares.

A wider range of investment selections

Designed to complement our broader range of savings and investment ideas, our experienced investor section is aimed at making it easier for you to find and compare the latest income and growth investment opportunities whilst also giving you plenty of investment ideas and product selections to help you identify whether they meet your needs.

This is where the experienced investor section offers additional investment opportunities, available to both new and existing customers. Listed here is our selection of plans whose performance will depend on a wider range of underlying investments, be this the FTSE 100 Index or indices from the US or Europe, a blend of more than one index or perhaps a specific number of stocks targeted at a benchmark or sector.

Who is an experienced investor?

As such the knowledge and experience required to review them as a potential investment opportunity is considered higher than for our other investment plans. Therefore these might not be appropriate for someone new to this type of product or new to investing but rather are designed for customers who have already invested in a similar product or who fully understand and have experience of putting their capital at risk.

Since Fair Investment does not give advice, we feel there are certain investments which should only be considered if this knowledge and experience can be established and although there are no formal set criteria, the following are examples of someone who might be considered an experienced investor:

1.  An existing customer who has invested in a capital at risk product

2.  A new customer who has, in the last 5 years, held a capital at risk investment

3.  A new customer who has, in the last 5 years, held a structured product

Since an assessment of appropriateness forms part of our application process, all investors into any of the plans listed in this section will need to show that they have the necessary knowledge and experience by confirming they fit into one of the above or similar and we may need to obtain further details from you in order to confirm this.

Latest selections

With the potential for double digit growth returns and high income yields, this section is aimed at more experienced investors who are looking for a wider selection of top income and growth ideas and who are prepared to take a higher level of risk. Here we take a closer look at some of our current selections.

Income selection

Potential for 8.8% p.a. income, quarterly payments

The Focus Dual Index Quarterly Contingent Income Plan offers up to 8.8% each year based on the performance of the FTSE 100 Index and the EURO STOXX 50 Index, the 50 leading blue chip companies in the Eurozone. A 2.2% payment is made at the end of each quarter provided both indices close at or above 80% of their values at the start of the plan. If one or both Indices are below 80%, no income will be paid for that quarter.

The plan also offers some capital protection against falling stock market since your initial investment is returned in full unless one or both indices falls by more than 40%, measured at the end of the fixed term only. If this does occur, your capital will be reduced by 1% for each 1% fall of the worst performing index, so you could lose some or all of your initial investment.

Fair Investment view: “If you are looking for a high level of income and do not think either the UK or Eurozone markets will fall by more than 20% over the medium term, this plan could be a timely opportunity, whilst the quarterly payment frequency is likely to appeal to most income seekers. The plan also has the opportunity to mature early each quarter from year onwards in which case investors will receive their original capital back along with a final income payment.”   Click here for more information »

Growth selections

Potential 15% return after just 12 months

The Dual Index Kick Start Plan from Meteor is a fixed term investment that will mature early or ‘kick out’, depending on the performance of the FTSE 100 Index and the EURO STOXX 50 Index (made up of the 50 leading blue chip companies in the Eurozone). If the values of both indices at the end of each year are at or above their values at the start of the plan, investors will receive 15% at the end of year one, or 15% plus an additional 10% for each year thereafter.

If one or both Indices close below the required level each year, no growth return will be paid and your initial investment will be returned in full unless one or both Indices has fallen by more than 40% at the end of the plan. If it has, your initial capital would be reduced by 1% for each 1% fall of the worst performing Index, so you could lose some or all of your investment.

Fair Investment view: “Investors in search of the potential for high returns may find the opportunity for 14% growth after just 12 months along with a full return of capital, to be a compelling one. Depending on your view of the UK and European markets, an investment that offers the potential for such high growth returns even if the markets stay flat, could be worth a closer look.”   Click here for more information »

Potential 11% annual returns

The Investec Dual Index Step Down Kick Out Plan offers 11.0% for each year invested (not compounded) provided the value of the FTSE 100 Index and the Euro STOXX 50 Index (made up of the 50 leading blue chip companies in the Eurozone) are at or above a specific level at the end of each year, compared to their values at the start of the plan. The required levels are 100% at the end of year two, reducing by 5% each year thereafter down to 80% in the final year.

If either or both Indices close at or below the required level each year, no growth return will be paid and your initial investment will be returned in full unless one or both Indices falls by more than 50% during the plan. If this occurs and one or both Indices are lower than 80% of their starting values at the end of the plan, your initial capital would be reduced by 1% for each 1% fall of the worst performing Index, so you could lose some or all of your investment.

Fair Investment view: “The potential for double digit returns even if the markets go down by up to 20% could be a compelling investment proposition in the current investment climate and this plan is proving popular with our existing investors. So depending on your view of the UK and European markets, this plan could offer a compelling combination of high growth potential, the ability to mature early along with some capital protection should markets fall.”   Click here for more information »

Growing number of investment opportunities

As stock markets around the globe continue to provide a mixture of highs and lows, this section has grown more and more popular since launch and we continue to work hard to expand the depth and range of opportunities that are listed. We hope you find the experienced investor section helpful and easy to use – please do let us know what you think or if you have any questions: email us at [email protected] or call us on 0845 308 2525.

Keep visiting for the latest plans

Changes to stock market conditions bring with them new investment trends and opportunities. Structured investment plans can often be well placed to capture some of these opportunities and so there are a regular flow of new investment ideas on offer and we make regularly changes to the investment plans listed in the section. These plans are normally only available for between four to six weeks and since they can be very popular, some do close early because they have been oversubscribed. Therefore keep visiting in order to seek out the latest offers.

 

Visit the Experienced Investor section »

 

No news, feature article or comment should be seen as a personal recommendation to invest. Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment. If you are at all unsure of the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.

The plans detailed in this article are structured investment plans that are not capital protected and are not covered by the Financial Services Compensation Scheme (FSCS) for default alone. There is a risk of losing some or all of your initial investment. There is a risk that the company backing the plan or any company associated with the plan may be unable to repay your initial investment and any returns stated. In addition, you may not get back the full amount of your initial investment if the plan is not held for the full term. The past performance of individual shares, the FTSE 100 Index and the EURO STOXX 50 Index is not a guide to their future performance.