How Smart Investors Navigate Volatile Markets
Anto Joseph on 26 Mar 2020
Despite proactive action being taken by governments to contain the virus and provide monetary & fiscal stimulus as a bridge to buffer economies, markets are experiencing unprecedented volatility. How will smart investors navigate volatile markets?
'Do nothing' or 'act' to navigate volatile markets
Investors undeniably face a conundrum and the ultimate decision of whether to ‘’do nothing’’ or to ‘’act’’. The former option purports that volatility is too high and while a buying opportunity may present itself, the bottom is difficult to pick; the latter suggests either, closing positions and crystallising losses or buying into the excessive volatility at the risk of compounding further losses in the short term.
At Stropro, investors have been taking an alternate approach, rather than simply buying or selling they are seeking to take advantage of market volatility, investing in tactical opportunities that protects capital against immediate downside risks and locks-in enhanced returns.
Structured product investment offerings
Since November 2019, Stropro’s offering of Structured Products launched and funded through the platform have provided reassurance and confidence to investors despite the significant market sell-offs amidst the COVID-19 panic. The portfolio consists of baskets of Structured Product investments assembled under various themes. These include diversified global miners, US technology giants and the world’s most capitalised banking stocks.
While few people, including our investors foresaw the global pandemic and the wrecking ball it released into global financial markets, they had formed the view that asset valuations had become inflated. At the same time they had become increasingly frustrated by the environment of low interest rates. So the opportunity to participate in tactical trades designed to enhance yield and protect against market volatility was clear and obvious.
Strategy during investment market volatility
Our strategy was simple; ‘Protect against downside risks and deliver locked-in, income-like returns on longer time horizons beyond 18 months’. Unlike other market participants who continued to add exposure to equities, exit positions or take no action, our Structured Product investors have been ‘buffered’ from the effects of the high range volatility and are well on track to realising enhanced returns, between 7.5 – 11%p.a.
Additionally we have had no redemption’s, demonstrating the confidence from investors with the products deployed.
I will talk you through one of the tactical investments structured around the US Global Technology basket:
– Underlying Four (4) US Technology giants: Alphabet (Google), Microsoft, Apple and Facebook.
– Downside protection via a 35% buffer on the above underlying stocks.
– Long dated maturity, 3 year term.
– Fixed return of 7.5% p.a (paid quarterly)
– The product pays a regular coupon of 7.5% p.a. Paid quarterly to investor
– The product has a 35% downside buffer – investors capital is only at risk if the stocks fall by 35% or more at maturity.
– If the buffer is breached during the term of investment, this does not impact investor capital, we allow time to play out.
Regardless of market outcomes, investors have locked in a 7.5% coupon, guaranteed by the issuer. Investors also do not have to worry about interim volatility that may exist. The first distribution was paid to investors in March 2020 in an environment where interest rates have continued to fall and volatility was at its all time highs.
Benefits of structured products during volatile markets
Structured products allow investors to protect and preserve their principal capital by ‘buffering’ volatility while generating attractive risk-adjusted returns. Investors who are concerned about the adverse impacts of further volatility should consider this strategy.
The simplest and easiest way to gain access to this unique world of structured products is to register at Stropro along with other Wholesale and Sophisticated investors. Once registered you will gain access to the Marketplace of structured product opportunities.
Anto Joseph is the Chief Executive Officer of Stropro
Stropro is an investment platform for wholesale and sophisticated investors where you can access Structured Products issued by investment banks. The tactical investment opportunities we arrange are generally defensive and focused on generating enhanced returns regardless of the economic conditions. In times of economic volatility these Structured Products can be particularly attractive. Our view is that Structured Products belong in all sophisticated investor portfolios and should make up approximately 5% of your portfolio allocation.
For further information contact email@example.com