Investment Newsletter - December 2016

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Investment Newsletter December 2016

A close run thing You couldn’t get much closer… Our Barclays defined return product reached its second anniversary on 2 December 2016. Had the FTSE 100 closed at above 6,742 on that date, the product would have “kicked out” and the return over the two years from launch would have been 18.3%. Of the 54 trading days from 16 September to 2 December the FTSE had closed above 6,742 on every day but one. Only 11 November saw a close below this level during the period.

Mike Deverell Investment Manager

However, on 2 December the FTSE ended at 6,730, just 12 points below the required level. Our frustration has been compounded as (to date) every day since then has also seen the index finish above this level. Talk about unlucky! Having not kicked out this year the investment now rolls on to its third anniversary. On 2 December 2017 it will go through the same process and if the FTSE is

then above 6,742 the product will end with a return of 27.45% from launch (three times the initial rate of 9.15%). The same happens at each anniversary up to its sixth year with the potential return continuing to increase by 9.15% each anniversary. On 2 December 2020 the product will end, if it has not done so beforehand. If the market is down but less than 40% below the strike level, the final price would be the same as the initial price of £1.00 per share. Investors who bought at outset would therefore get their money back. If the FTSE was 40% or more down on that date the product would fall by the same amount. However, we don’t have to wait for an anniversary date to sell the product. Whilst the price of the investment would have been £1.183 per share had it kicked out, having not done so the price has now fallen back to around £1.12.

Equilibrium Asset Management LLP (a limited liability partnership) is authorised and regulated by the Financial Conduct Authority. Equilibrium Asset Management is entered on the Financial Services Register under reference 452261. The FCA 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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