Lowes Magazine 122

INVESTMENT

Autocalls standout performers

delivered positive returns (95.7%) – at an average annualised return of 7.37%. The worst performing quartile still delivered an average annualised return of 4.24% per annum; while the top quartile returned 10.31%pa. As discussed in our Autocall Review 2022 the autocall sub sector is dominated by contracts linked to the FTSE 100 Index and these have proven to be even more successful. More than 1,250 such investments have matured to date and of these only 8 across the whole period failed to produce a gain. Had these had the longer maximum possible durations – which Lowes advocates and introduced to the sector through our 10:10 Plan innovation – only one would have failed to produce a gain. The average annualised return achieved by all maturing FTSE 100-linked capital-at-risk autocalls to date was 7.9% The benefits of autocalls were particularly seen in 2020 when the majority of the potential calls / maturities were deferred to the next observation date. As a result, 2021 saw the highest number of autocall maturities in the five years (395). And in 2021, autocall maturities once again delivered strong returns for investors – with an upper quartile annualised average return of 9.69% and lower quartile of 4.88%. With considerable uncertainty still plaguing the markets, using investments which can offer defined returns and can help protect against falls in the market can be used effectively to diversify the risk/return profile and complement the funds and other investments in a portfolio. As with all investments, product selection with the right risk for the investor is crucial and we’re very proud of our proven ability to sort the wheat from the chaff for our clients benefit, as well as the positive impact our influence has had on the wider market. If you would like to read more, our Autocall Review 2022 can be found on our website at: www.Lowes.co.uk/AutocallReview22

STRUCTURED PRODUCTS HAVE CONTINUED TO DELIVER for investors despite the effects of the global pandemic on stock markets, with autocalls in particular, providing strong returns for investors’ portfolios. Lowes has an unrivaled position in the UK retail structured product sector, spanning more than two decades, during which time we have played an influential role in helping to shape it for better investor outcomes. Our significant investment in terms of research and analysis has paid dividends for our clients as well as others who follow our lead. Lowes Investment Department has recently published two more research papers examining the sector. The first is a comprehensive analysis of structured product performance of all products available via the intermediary market that matured over the five years to the end of 2021. This included the two years affected by the pandemic, during which the stockmarket fell by over 30% from high point to low, before recovering again. The second paper reviews the evolution of what has become the most prominent investment offering within the sector – autocalls or kick-outs as they are commonly known. The first autocall was issued in 2003; we recommended that to clients and it, like all but a very small handful of those since, performed admirably. The five-year review tells us that since January 2017, an average of 429 products have matured every year. In performance terms, the average annualised return for the five years across all products, including deposit based which inevitably have lower defined returns, was 6.12%; 9.66% top quartile and 1.93% bottom quartile. An average of just six plans a year returned a loss. The average duration of all plans – growth, income and autocall – before maturity was 3.76 years. Autocalls have proven to be the most popular investments and overall have not disappointed investors. In a falling market, their ability to roll-on potential gains to the next observation date, mean that they have a better chance of weathering downturns and deliver increased returns for investors as the market recovers. Across the five years 1,192 autocall products matured which were capital-at-risk, i.e. excluding deposit plans. Of these 1,141

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Structured Product Maturities

Capital at Risk Products

Deposits and Capital Protected

All products

2021

5 year average

2021

5 year average

All autocall products: Average annualised return All products

7.07% 9.69% 4.88%

7.37% 10.31% 4.24%

3.99% 5.67% 0.00%

2.79% 4.02% 0.68%

Upper quartile Lower quartile

FTSE 100 index only: Average annualised return All products

7.23% 9.70% 5.45%

7.40% 9.51% 5.88%

4.99% 5.67% 4.31%

4.15% 4.47% 3.50%

Upper quartile Lower quartile

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