Investment Newsletter - October 2012

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Investment Newsletter October 2012

Defined Returns We are pleased to report that the Defined Returns products we bought in October last year have now all “kicked out”. These structured products were designed to pay a set return provided that the FTSE was the same or higher than the starting level, at the anniversary date of each product. The FTSE was significantly higher for all of the products at the first anniversary. This means that the products end for those who bought them at outset have received the following returns from the banks: • Barclays – 12.75% • HSBC – 11.25% • Credit Suisse – 11.05% Those who bought on the secondary market will receive a slightly different return, depending on the price at which they bought. The products take some time to settle as the securities are wound up. The funds from all three products will be in your Nucleus or 7IM accounts by the end of the month.

Risk and Return We have been considering various reinvestment options including fixed interest and alternative equity. However, we have concluded that purchasing new Defined Returns plans which work in a similar way to last time is our preferred option. The returns from this type of product are not going to be as attractive as they were this time last year. There are a number of things which affect the “rates” which the banks will offer: • Market levels – which are much higher than 2011 when they were between 5,298 and 5,401 for the products we bought last year. • Volatility – the more volatile the markets, the higher the rates banks will offer. Recently markets have been relatively stable between around 5,750 and 5,850. • The perceived credit risk of the bank. In autumn 2011, we were in the midst of the European crisis which was having a knock on effect on the banking system. Due to heightened concerns, we were able to get some very attractive rates last year. At present, the perceived risk of most banks is much lower than last year, and therefore the rates they offer are lower. However, there are ways we can enhance returns.

Equilibrium Asset Management LLP (a limited liability partnership) is authorised and regulated by the Financial Services Authority. Equilibrium Asset Management is entered on the FSA register under reference 452261. The FSA regulates advice which we provide on investment and insurance business; however it does not regulate advice which we provide purely in respect of taxation matters. Copyright Equilibrium Asset Management LLP. Not to be reproduced without permission


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