Structured products are back on the investment menu – in newer, simpler forms – and the boutique investment manager Instreet has responded to this market demand with its latest offering called YIELD.
The three-year income investment product aims to balance higher yield against risk by being linked to a basket of Australia’s big four banks and delivering quarterly fixed income payments at 11 per cent a year.
Instreet managing director George Lucas says this latest offering cements his company’s dominance in the structured product market.
He says that the Financial Times reported recently about the growth in popularity of structured products in the independent financial advice sector following the introduction of regulatory reform in the UK’s Financial Services Bill in January – its version of Australia’s FoFA – as structured product provide a way for advisors to engage clients and have provided consistently higher returns with products similar to Instreet’s YIELD.
Lucas says investors are increasingly using structured products inside SMSFs. Using Instreet’s Yield and blending it with term deposits could bring annual yields closer to eight per cent without having to take full share market risk.
Competition is increasing in this market space as other product providers follow in Instreet’s footsteps and target SMSFs.
Lucas says YIELD does come with a potential downside. “The risk for this product is potential exposure to downward price movement of the lowest performing share from the basket, but only at the maturity date. If, on the maturity date, any share has dropped 30 per cent or more, the maturity value is decreased by the percentage fall in the worst performing share in the basket.
“It’s not a growth investment, nor is it risk free, but we believe we have balanced the risk/return trade-off,” he says.
“Quarterly income is paid irrespective of whether the Australian share market goes up or down. It has the cushion to absorb bank share price falls of less than 30 per cent at the maturity date and still receive full issue price back at maturity.”
The issue price is $1 per unit and behaves similar to an open ended investment with weekly liquidity.
About Instreet: www.instreet.com.au
Instreet, a Sydney-based boutique investment house, works closely with the financial adviser community to conceive and distribute retail investment products. After identifying adviser needs and market trends Instreet builds customised investments sourcing quality wholesale providers. By doing so, Instreet makes institutional assets available to individual investors. The end result is a range of investment solutions designed to better achieve the goals of clients and advisers.