Case Study: David Offer
Rory Turner on 25 Nov 2022
The Adviser’s clients were faced with a similar challenge to many investors in 2022.
Hold defensive assets like cash and bonds to preserve capital, but potentially miss out on elevated returns from buying stocks at depressed levels.
Invest in equity markets, and potentially generate enhanced returns, but also face a highly uncertain and volatile market resulting in possible losses.
The Adviser put it bluntly: “The prospect of buying stocks right now doesn’t excite anyone in 2022”
With Stropro, the Adviser worked on crafting a tailored strategy. The goal was to generate a fixed return close to 8% p.a., which would outperform equities in a flat to bearish market scenario.
The Adviser was happy to trade off potential upside growth in exchange for certainty of the 8% p.a. return.
The strategy was composed of 5 individual structured investments, each linked to a pair (or trio) of ASX-20 companies.
In addition to the 8% p.a. quarterly coupon, the structured investments included defensive features that allowed investors to reduce losses in a market downturn. Client’s capital was preserved provided the underlying stocks did not fall by 30% or more at maturity.
“Even if one of the reference assets falls below the barrier, I’m buying blue-chip ASX 20 stocks that we already own in our portfolios, at a lower price than today.”
By wrapping equities up in a Structured Investment, Investors are able to utilise that equity exposure to deliver defined investment outcomes. They aren’t meant to replace stocks or bonds, but instead complement both.
The ability to trade uncertainty for defined outcomes is one of the many strengths of structured investments.