A year to remember
CompareStructuredProducts.com - 12/10/2016
In September 2015 Lowes Financial Management introduced the ground-breaking 10:10 Plan from Mariana Capital. Now more than 12 months on, the ninth issue of the 10:10 Plan is now approaching the end of its offer period. The current tranche offers investors the potential to achieve 7%, 9.1% or 11.55% (Not compounded) gain for each year held.
The 10:10 Plan was designed based on the principle that stock markets are expected to rise over time and that shorter term market risk can be mitigated through longer term investment strategy. Therefore the longer the time in the market the more likely it is to generate positive returns.
The 10:10 Plan from Mariana Capital innovatively uses this principle in order to offer the benefits of a longer term structured product with the opportunity of a short term annual kick-out potential, from the 3rd anniversary, with coupons snowballing for each year the Plan runs.
By using a longer maximum term than that of a typical structured product (usually 5-6 years), the 10:10 Plan fundamentally increases the number of anniversary opportunities to successfully generate positive kick-out returns during the term. Whilst also repositioning investor exposure to market risk, through an ‘end-of-term’ protection barrier.
As its name suggests the 10:10 Plan is designed run for a maximum of 10 years, however the investment may mature after as few as three years. The extended potential investment term means that it will keep going until the first anniversary at which a positive return is triggered, or until it is encashed, or until the full 10 years have elapsed.
An evolving investment
Like many innovative concepts, the mechanics of the 10:10 Plan have gradually evolved since its launch in September 2015. The very first Plan had two options and used only one counterparty Société Générale and whilst still the counterparty, over subsequent tranches the Plan has evolved in order to reduce the risk of a loss in the event that any bank defaults. In addition, a defensive option which can produce gains even if the FTSE falls has featured since the second launch.
The latest issue of the 10:10 Plan has a defensive, market neutral and bullish option and has the credit / counterparty risk diversified equally between, Santander UK plc, Standard Chartered Bank, Macquarie Bank and Lloyds Bank plc, all of which are rated ‘A’ by Standard & Poor’s. This spreading of the risk across four separate financial institutions reduces the potential for a catastrophic loss occurring should one bank fail.
The maximum 10-year term helps counter one of the criticisms of structured investments, that shorter fixed term products may potentially crystallise losses in market downturns when some would prefer to stay invested for the longer term, in anticipation of markets recovering to more normal levels and generating positive returns.
So how has the market performed?
The 10:10 Plan is linked to the fortunes of the FTSE 100 Index and the first potential maturity is still two years away, however the surrender value of the first tranche is now 7.8% higher for the market neutral option and 10% higher for the bullish option. *
Since the launch of the first 10:10 Plan we’ve witnessed some significant economic and political uncertainty which has led to a degree of market volatility but its pleasing to note that based on the current position of the FTSE 100, all options of the first six tranches, including the bullish options, will mature on their first possible maturity date – their third anniversary.
The graph below shows the index since the first Plan was launched in September 2015 and that whilst there has been some turbulence, the market has not fallen anywhere near the territory of the 70% protection barrier of any tranche – but even if it had it is important to remember that this barrier only applies if an early maturity is not triggered to the extent that the plan runs for the full maximum ten-year term.
The Mariana 10:10 Plan investment was conceived and developed with input from Lowes Financial Management. In our opinion, the annualised coupons, potentially payable from year three onwards, coupled with the extended maximum term of ten years, provides increased opportunities for the investment to successfully generate positive returns, making this a compelling investment proposition.
In addition, while it needs to be acknowledged that the barrier protection at 70% of initial index level is higher than many other products in the market, this needs to be considered in the context that it is only observed at the end of ten years, which repositions the risk when comparing to shorter term 5 or 6 year products, and it is only relevant in the event that an earlier kick-out maturity was not triggered – with the likelihood of the Plan failing to generate positive returns fundamentally reduced by the extended investment term and the additional anniversary kick-out triggers.
On balance therefore we feel that this is a potentially appropriate investment for use in a diversified portfolio, for investors who understand and accept the risks.
The current tranche of the 10:10 Plan closes on the 19th October.
Lowes has provided input into the concept, development, promotion and distribution of this Plan. The provider’s charges/fees are built into the terms of the investment - Lowes has a commercial interest in the Plan as a result of its involvement in its development and promotion. All Plan returns are stated after allowing for the provider’s charges/fees. Where Lowes is involved in advice on or the intermediation of this investment to retail clients, it will not be paid any fee from Mariana for its input into the Plan. Lowes has robust systems and controls in place to ensure that it manages any actual or potential conflicts of interests in its activities.
This article should not be construed as advice or a recommendation to invest. An investor should not rely upon our opinion but should conduct their own analysis or utilise an adviser. All investments involve risk and you could lose some or all of the money you invest. It is imperative you read the Plan brochure and terms and conditions and understand all of the risks prior to proceeding. If you do not fully understand the risks, the commitment or are unsure as to the suitability of the investment for you, you should not proceed but instead contact us. Our advisers will be happy to help advise on the correct product for your portfolio. Alternatively, if you require more information on any of the products discussed you can contact us on
*Surrender values as at 10.10.16