Investec offers growth and capital preservation in new structured product


Volatility has characterised the global investment landscape since COVID-19 first emerged in early 2020. This global uncertainty heaped additional pressure on local investor returns amid weak domestic fundamentals and legacy structural impediments to economic growth.  In response, Investec has launched International Titans Basket Limited, a structured five-year investment that will offer local investors global equity exposure for diversification and growth, along with a USD capital preservation benefit.

The company, which is incorporated in Guernsey and is listed on the Bermuda Stock Exchange, aims to return at least 100% unlimited upside participation at maturity in US dollars derived from growth in the MSCI World 4% Decrement Index (the “Index”).

“This structured investment offers a suitable Rand hedge for sophisticated investors who want to protect their capital in US dollars by the acceptance of the credit risk of the issuing Bank and reference entities,” explains Japie Lubbe, Investec Structured Products. 

The principal preservation in International Titans Basket Limited is in US dollars by means of an Investec Bank Limited US dollar-denominated credit-linked note (CLN), which proportionately references the subordinated tier 2 debt of seven reference entities, which are four offshore and three local banks. This credit reference to subordinated debt represents a claim which ranks behind all depositors and other senior creditors.

Decrement indexes have gained popularity following the COVID-19 outbreak as a way to remove some of the dividend forecast risk experienced during the pandemic after dividend yields fell significantly.

“Utilising this Index results in enhanced option pricing, while also minimising overall costs, which ultimately benefits investors as they can get unlimited upside to the index performance with principal protection,” continues Lubbe. 

Furthermore, the Index includes a broad range of large and mid-cap companies across 23 developed market countries, predominantly from North America, which accounts for over 70% of the index’s country weight, and Europe. 

“This index composition provides investors with diversification across multiple geographies and industries, which offers access to numerous growth opportunities and a spread of risk,” continues Lubbe.

“And US and European markets remain at record highs as economic activity continues to ramp up on the back of more advanced vaccination rollouts.” There is significant liquidity in the market, with extremely low prevailing interest rates making cash and bond investments limited alternatives.

Amid the prevailing uncertainty and potential volatility related to the COVID-19 pandemic’s progression around the world, investors also want an element of capital protection in their diversified portfolios. 

“The threat posed by new variants and an uneven global recovery necessitates a defensive slant in every investment strategy, without compromising potential returns,” elaborates Lubbe.

Investors require a minimum investment of USD 19,000 for B Class USD shares, or AUD 25,000 for A Class AUD shares. 

“Local investors can leverage various offshore investment avenues to access the investment, including their SARB-approved offshore allowances, or via asset swaps that make use of the foreign portfolio investment allowance,” concludes Lubbe.

The closing date for investments is 11 October 2021. 

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