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Performance of Maturity Products in 2014

The Performance of Maturity Products in 2014

By Ian Lowes, founder of

Lowes Financial Management is considered one of the leading authorities on structured products. The firm is behind the adviser website which gives advisers the opportunity to research and compare the structured products ordinarily available through IFAs. With a database of products launched since 2000, the firm has collated the performance data for all plans distributed by IFAs that matured in 2014. While past performance is not a guide to the future Lowes hopes that the information will improve investors’ and advisers’ ability to analyse structured products and make informed investment decisions. Lowes believe that the research is evidence that the products do exactly as they say on the tin and are worthy of a place in investors’ diversified portfolios.

Click here to access the full maturity data


There were 470 products that matured during 2014 with over 94% returning a gain for investors.

Only 1% returned a loss with the remaining 5% returning investors' original capital in full but with no gain. The biggest overall gain was posted by the Investec FTSE 100 Accelerated Growth Plan 6 which produced a gain of 122.57%, produced against a 85.6% rise in the index. This equates an annualised return of 17.35%.

The greatest annualised gain of just over 19% was achieved by the Meteor FTSE 5 Enhanced Quarterly Defensive February 2013 which offered 4.85% gain on the net investment for each quarter held, payable on any quarterly anniversary date from the fourth quarter onwards, provided that five specific shares closed no more than 15% below their respective initial prices. The five shares were Aviva plc, BHP Billiton Plc, BP Plc, GlaxoSmithKline plc and Tesco Plc. This product matured on its first anniversary in February 2014 returning investors’ capital in full plus a gain of 19.4%. Whilst Tesco shares had already started their decline they only lost 10.35% over the investment year whereas BHP suffered the biggest fall, albeit at 14.26% this was still not enough to defer the maturity.

Looking at the whole gamut of products, the average annualised return was a healthy 7.35% achieved over an average term of 3.98 years with the top quartile returning a 12.36% per annum gain on average. The bottom quartile produced an average annualised return of 2.94%. However, because overall averages include too disparate a range of products to provide any real context it is necessary to look below the surface.

The first significant difference that should be noted is between products linked solely to the FTSE 100 and those with other underlying measurements. The former represent the majority, nearly 75%, of the products that matured, with the remainder a broad mix of underlying measurements as per the Meteor FTSE 5 contract, linked to multiple shares and dual index strategies with the FTSE 100 and S&P 500 and FTSE & EUROSTOXX 50 being the most common.

The average returns generated by many of those products that were linked to underlying measurements other than the FTSE 100 only were fairly significantly reduced by those products linked to a particular basket of commodities or shares that matured with losses.

Consequently, while the average terms (3.38 years for FTSE 100 linked products and 3.63 years for non-FTSE 100 linked products) and even the average annualised returns (6.95% and 6.27% respectively) were broadly similar, the 'spread' of these returns for non-FTSE 100 linked products was much greater. The average first and fourth quartile of returns from products linked to the FTSE 100 Index were 11.82% and 2.08% respectively while the comparable figures for the non-FTSE 100 linked products were 13.12% and -1.47% respectively with the worst performing of all products, which suffered the double whammy of commencing prior to the credit crisis and being linked to the performance of five banking shares, posted a net loss of 29.39% over its six-year term.

Looking at each product type in its own right, the average annualised return from the Capital at Risk products was, at 9.02% and 8.97% for FTSE 100 only linked and non-FTSE 100 linked products respectively. These figures were understandably higher than those achieved by the Capital 'Protected' and Deposit Based products. Even the fourth quartile of FTSE 100 linked Capital at Risk products produced an average annualised gain of 6.21%, compared to 2.76% achieved by non-FTSE 100 linked Capital at Risk products. This bottom quartile average annualised return of the Capital at Risk products was well above the average annualised return of both Capital 'Protected' and Deposit Based products.

The returns achieved by Structured Deposits were, on average, slightly greater than those achieved by Capital 'Protected' products. Looking first at the FTSE 100 only linked products, the average annualised return of the maturing Structured Deposits was 5.68%, compared to Capital 'Protected' products' equivalent figure of 5.58%. This is explained in part by the difference between their average terms with the Structured Deposits running for an average of 3.99 years and the Capital 'Protected' products running on average for 5.13 years. This is in part because many of the latter commenced in what we now know to have been market highs thereby reducing the potential for positive performance.

In terms of returns for non-FTSE 100 linked products, the average annualised return for the Capital 'Protected' products was only 3.08% and 2.01% for the Deposit Based products, which is much lower than the FTSE 100 only linked products. This is due to the fact that there are only five products in this subset, most of which were linked to house prices with all but one returning capital only with no gain.

Auto-calls made up 31.91% of the total number of products maturing and, with an average term of 1.83 years and an average annualised return of 9.14%, were comfortably the best performing of all of the investment types.

The results achieved by the FTSE 100 only linked auto-call products were slightly lower than those achieved by non-FTSE 100 linked products when looked at on an annualised basis (8.26% over 1.65 years for FTSE linked and 10.33% over 2.13 years for non-FTSE auto-calls). This reflects the higher risk/reward trade-off with non-FTSE products.

With their early maturity features, auto-call products have the potential to benefit from shorter-term market rises. This is reflected in the average term of 1.83 years. This is not the case for most growth products, which had an overall average term of 5.09 years.

Growth products made up 47.23% of the total number of products maturing, with an average term of 5.09 years and an average annualised return of 4.26%. For those growth products linked to the FTSE 100 only, the results were attractive, with an average annualised return of 7.52% over an average terms of 4.95 years. The picture was somewhat weaker for non-FSTE 100 linked growth products with average annualised returns of 3.29% over 5.64 years. There were only a few Capital at Risk products that suffered due to being linked to a particular baskets of commodities or stocks.

Income products accounted for 17.45% of all products in 2014, with an average term of 5.18 years and an annualised return of 3.38%.

While not entirely unexpected given the performance of the FTSE 100 during 2014, it is worthy to note that no product that was FTSE 100 only linked and matured in 2014 did so returning anything less than the full capital that was invested.

It is worth looking at those counterparties that have been backing plans in the market. 27.02% of products were launched by Investec and 15.75% by Barclays. In 2013, 26.59% of maturing products had Barclays Bank as the counterparty whereas the relatively weaker Investec Bank was the counterparty to 16.04%. This shift and the fact that Investec terms have, in general been historically slightly more attractive due to the increased counterparty risk, which leads to an increased funding rate compared to Barclays, has in part, been responsible for a slight improvement in the overall maturity figures compared to last year. There have been no cataclysmic events like the financial crisis to collapse any of the counterparties backing the investments and the counterparties’ solvency has ensured that the returns generated by structured products have been exactly as were set out in the product literature.

It is indisputable that structured products maturing in 2014 have, in general, performed very well for investors. Given that the investments protected capital against all but the most extreme market conditions (more extreme than even 2008), for the FTSE 100 linked Capital-at-Risk products to return an average annualised gain of 9.02% is extremely impressive.

The fact that no FTSE 100 product produced a negative total return is also worth noting again.

Click here to access the full maturity data