Structured products making a comeback as correction threat grows

Structured products platform Stropro has launched a new product suited for the income-seeking investor. With global cash rates at near-zero and minuscule bond yields, conditions for income investors have gone from bad to worse. The return on cash in some cases is even negative after inflation. The only place to go for yield is up the risk curve, and into bank stocks for the dividends, for example. With a bit of hope, maybe the share price might rise.

A reasonable strategy. That is, as long as share prices rise and dividends are not cut.

With equities running red-hot, most analysts expect a correction. So, we find ourselves in a conundrum. The only way to find yield is to go up the risk curve and buy equities, but should markets correct, the capital losses will more than offset the income gained.

The platform says it “has arranged a 12-month investment linked to the big four Australian banks (ANZ, CBA, WBC, NAB) that offers a fixed 5 per cent coupon, paid quarterly to the investor. The key benefit of investing in the “big four bank” strategy rather than investing directly in the stocks is the 30 per cent downside barrier feature, designed to preserve capital over the term of the investment.”

Stropro says the opportunity cost of the strategy is that investors do not participate in any growth in the share prices. So, investors in the big four Australian banks strategy are trading-off future potential growth, for greater certainty of income today.

Near-zero yields have become one of the biggest hurdles for retirees seeking investment income. And then, if we add the negative impacts of COVID-19, the income received can harm living standards. Hence it’s worth having a look at Stropro’s solution for income investors: 

INVESTMENT SUMMARY:

• Issuer: Contact Stropro for further information (team@stropro.com)
• Rate of return: Fixed 5 per cent a year (paid quarterly)
• Underlying Assets: ANZ, CBA WBC and NAB
• Downside barrier 30 per cent (The underlying assets can fall up to 30 per cent before your capital is at risk)
• Term: 12 months
• Minimum Investment: $20,000
• Close Date: 9 November 2021

Ishan Dan

Ishan is an experienced journalist covering The Inside Investor and The Insider Adviser publications.