Lowes Magazine Issue 121

INVESTMENT SPECIAL

Annual Structured Products Performance Review

LOWES CONTINUALLY MONITORS THE STRUCTURED PRODUCTS market and every year produces the sector’s only Annual Performance Review, showing how the products maturing in the previous calendar year have delivered for investors. While individual products can be seen to have done very well for investors, we feel it is important to show the full picture for all products available to the financial advice market. Full transparency helps to highlighting the value of structured products, and their potential for use within investment portfolios. In 2021, a significant 529 products matured, which was a 125% increase on the previous year. The increase was in large part due to the fall in the stockmarkets in March 2020, which meant that many of the autocall products that under normal circumstances were due to mature were rolled on to this year. Three quarters of all plans maturing in 2021 were autocalls. Of the 529 maturities, 82 were Lowes ‘Preferred’ Plans – the products which we believed at time of their launch offered the best proposition for our investors. As can be seen from the tables on this page, structured products once again have produced sterling returns for investors, doing what they say on the tin. Despite the turbulence and uncertainty caused by the coronavirus pandemic, 91.3% (483) delivered positive returns for investors, 40 returned capital only and just 6 lost capital. The latter were all plans linked to individual shares which we had identified as being potentially loss-making maturities for several years. Average annualised performance across all products (capital-at-risk and deposit plans) was 6.20%, with an upper quartile average return of 9.34% and lower quartile of 2.56%. Capital-at-risk plans protect investment capital to a set point, for example, unless the underlying is down more than 35% from launch at the investment’s final maturity date. As a result of the greater risk involved, they can offer higher levels of return than deposit plans, which guarantee return of capital. Overall, the average annualised return for capital-at-risk plans was 6.82%, with a top quartile average of 9.57% and lower quartile, 4.23%. For deposit plans, the quartile returns were respectively 4.87% and nil (solely returning capital). Consistent with recent years, the FTSE 100 Index in isolation was the most prevalent underlying measurement utilised, accounting for 62% of all maturities. The Lowes advantage As a recognised authority in structured products, we are delighted to be able to report that in all but one sub-category, the Lowes ‘Preferred’ Plans outshone the market again over the past year. 76 of the plans delivered a positive return, 6 returned capital only and none lost money for investors. Overall, the average annualised return for Lowes ‘Preferred’ Plans which were capital-at-risk was 7.57%. The thirteen ‘Preferred’ structured deposits returned an average annualised interest return of 3.89%. In most cases the ‘Preferred’ plan maturities not only outperformed their peers but significantly outperformed the underlying to which they were linked (eg. The FTSE 100 Index). The table allows for an easy comparison of how Lowes ‘Preferred’ Plans have performed against the market average. You can obtain a copy of this year’s Performance Review at: www.Lowes.co.uk/SPReview2022

All Products

Structured Product Maturities 2021 Number of product maturities Number that generated positive returns Number that returned capital only

Lowes 'Preferred' Plans

529

82

483

76

40

6

6 Number that lost capital

0

3.39 Average duration / term (years)

4.04

Average annualised returns

All Capital-at-Risk Products

6.82%

7.57%

9.57% Upper quartile 4.23% Lower quartile

11.30% 4.22% 3.89% 5.53% 0.94% 6.99% 10.77% 3.26%

All Deposit Products

2.13%

4.87% Upper quartile 0.00% Lower quartile

All Products

6.20%

9.34% Upper quartile 2.56% Lower quartile

12 Lowes.co.uk