Doug Goodwille from Kayne Anderson speaks to Drew Meredith from The Inside Network on market thinkers.
While a surging gold price is on hold as the world adjusts to a Trump presidency, all the factors that saw its price rise more than 50 per during his first term in office – trade disputes, fiscal deficits and geopolitical tensions – are almost certainly guaranteed the second time around.
Structured products gaining steam in low rate environment
Investor uncertainty appears to be returning to markets. Volatility has returned to the ASX 200 as spiralling commodity prices dragged the benchmark index lower. The economic impact of COVID-19, US taper talk and inflation concerns continue to present short term risks.
On the other side of the globe in Europe, the sentiment is generally more positive driven by the re-opening of the economy and their commitment to grow through green infrastructure plans.
Like Australia, high net worth European investors have been combatting low interest rates for decades, but have innovated their way through to create attractive solutions to address the current environment.
Below I explain one of Europe’s most popular strategies for generating income which has just been added to the Stropro Marketplace for our clients.
Innovating through low rates with Structured Investments
Structured investment volumes are surging at record levels in both Europe and the US.
In the US for example, from 2018 to 2021, the total annual sales volume of equity linked structured investments alone has surged by 583%.
As the name suggests, structured investments are versatile instruments that can be tailored to investment objectives, the market environment and are popular due to their risk management features.
For decades, European Investors have been targeting fixed return strategies linked to well known indexes such as the Euro Stoxx 50 and more recently, the Euro Stoxx Banks index.
The 6% p.a. Fixed Coupon Linked to European Banks
Simply put, the strategy generates a fixed return of 6% p.a.paid quarterly. Investor capital is at risk if the level of the Euro Stoxx Banks index falls by 40% at maturity.
The maximum term of the investment is 5 years. So compared with equity investors chasing dividends, the strategy has a much lower chance of losing capital but also pays a more reliable and dependable income stream.
From a liquidity perspective, investor capital can be returned as early as 1 year should the index appreciate above its starting level – this feature helps deliver returns early and acts like a profit taking feature during rising markets.
At Stropro, we offer investors the ability to exit at any time during the investment term at the prevailing market valuation determined by the investment bank issuer.
Why European Banks?
The European Banking sector has a favourable economic outlook. Strong earnings are being reported on the back of EU economies reopening and the lifting of restrictions on dividends.
From a valuations standpoint the Price-to-Earnings ratio of the European Banks Index is 11.7x and presents good value compared to other benchmarks.
There are of course other risks and benefits to the investment, so please review the materials available on the platform at www.stropro.com.
