When a Little Means a Lot
30 March 2021
Sometimes in life it can be the small things that make all the difference and last week proved to be no exception. Having initially struck on the 21 December 2018, one of our structured notes matured on the 22 March, being its second observation date after 2.25 years. An at the money contract, the terms required the FTSE 100 to be at or above 6,721.17 on any of the notes 9 observation dates. Having missed its first opportunity to kick out in March last year, the kick out was successful this time round, with the FTSE 100 closing at 6,726.10, a mere 4.93 points above the required level.
That small difference however was enough for the note to deliver a 33.2% return for the 2.25 year period, equating to an annualised return of 13.58%. Not bad for a period where the underlying index delivered a total return of 9.23%* and a price only return of 0.07%*. Indeed over the same period the IA UK All Companies sector average delivered a total return of only 21.49%*, with funds undoubtedly helped by exposure to mid and small cap stocks, where indices returned 27.97%* and 40.23%* respectively. Still, the performance achieved by the note would have placed it firmly in the 1st quartile in the sector over the period. All the while, as investors we had the comfort that the invested capital would be returned at the end of the term as long as the index did not close more than 70% below the initial strike level.
Not a bad way to gain your UK large cap equity exposure, but then again, given the terms of the investment which we were able to secure at the time of striking, we wouldn’t have been disappointed to see it run for a little while longer!
*Source: FE Analytics
This article is for information purposes only and should not be construed as advice. We strongly suggest you seek independent financial advice prior to taking any course of action.
The value of this investment can fall as well as rise and investors may get back less than they originally invested. Past performance is not necessarily a guide to future performance.
The Fund is suitable for investors who are seeking to achieve long term capital growth.
The tax treatment of investments depends on the individual circumstances of each client and may be subject to change in the future. The above is in relation to a UK domiciled investor only and would be different for those domiciled outside the UK. We strongly suggest you seek independent tax advice prior to taking any course of action.