May 15, 2024

Structured products used to navigate SA market

Spread the love
Structured products have become a popular way to hedge against market uncertainty, and there’s no shortage of that given the war in Ukraine, tensions in the Middle East, and elections just around the corner.
Many of these products are designed to protect capital and, with the addition of derivatives, spice up performance where certain conditions are met.
A case in point is Discovery’s suite of rand-based structured products, now almost eight years old with multiple tranches issued during that period — all but one delivering on their target of 200 percent of capital — that’s 100 percent cumulative return — over five years (before fees and taxes).
The latest offering is the Discovery Dollar Capital 200+ structured product, its latest issue in US dollars.
The investment offers a degree of capital protection if markets underperform, but a potentially significant return of 100 percent cumulative return in US dollars if a global share portfolio is flat or positive at the end of five years.
The capital is protected unless the underlying share portfolio declines by more than 30 percent at any stage in the five-year period.
However, if the underlying global share portfolio grows by more than 100 percent over the five-year period, the investor gets to keep anything above 100 percent.
The minimum investment amount is US$10 000 (around R183 300 at the current exchange rate), for which South Africans can draw on their R1 million a year Special Discretionary Allowance and, if that’s not enough, their R10 million a year Approval International Transfer (AIT) allowance, for which they require tax clearance from the South African Revenue Service (Sars).
An annual fee of 1,3 percent is charged on the global share portfolio

Leave a Reply

%d bloggers like this:
%d bloggers like this: