Tuesday, 03 March 2015

Newly launched range of structured products aimed at retail investors

Written by
Lance Solms, head iTransact

Varying degree of capital protection, reduced risk and volatility, tax efficiency; minimum investment of R10,000 assures widespread access in investment community

Johannesburg, March 2, 2015: South Africa’s investors will now have far greater access to the asset diversification and protection attributes of structured investment products through the launch of the iStructure product line, which offers innovative structured products designed by four local and international banks.

Available through a countrywide network of financial advisers, iStructure will enable retail investors to invest in market-linked, pre-packaged, fixed-term investment products that provide varying degrees of capital protection, the potential to earn positive returns in most market conditions, tax efficiencies and reduced risk and volatility.

iStructure has been launched by iTransact, the country’s only index product investment platform for financial advisors, which is a leader in the distribution of exchange traded funds and listed notes, portfolios and retirement annuities. iTransact is part of Automated Outsourcing Services (AOS), one of the country’s largest independent administrators of units trusts, ETFs, ETNs, hedge funds and structured products. 

Barclays Africa, Investec and international banks Societe Generale and BNP Paribas have put together the structured products that will be available to investors through lump-sum investments of as little as R10,000.

“We want to give retail clients exposure to structured products through different types of wrapper that are suitable to their investment objectives and financial capacities,” said Lance Solms, the head of iTransact, stressing that globally, structured products are recognized as an important component of a well-diversified investment strategy, offering opportunities that traditional investments, such as unit trusts, cannot offer.

“By commoditising structured products, we have made these innovative and flexible investment solutions available to retail investors. This is really bringing the tools used in a modern portfolio within the reach of the ordinary investor. ”

iStructure products only available through investment advisers; aiming for R1 billion a year take-up by investors

Financial advisors will also ensure that the products are suitable for investors.

According to Solms, it is hoped that uptake of the products will exceed R1 billion year within the next year as investors recognise the variety and value they add to the investment options available in the market.

Initially, the structured products being offered by the four banks will be linked to the performance of the well known indices or stocks, such as the FSTE/JSE, Top 40 Index or Apple Inc, but there are plans to diversify further at a later stage.

Most of the products will be for investment terms of five years, although some will have shorter terms. Fee transparency is an important feature of the new products, with all fees being decided upfront and the remaining funds being fully invested. 

“With local and international share markets performing strongly over the past few years, these products can enable investors who have made good profits to protect their gains and retain exposure to the markets,” said Solms. “Structured products are designed to work for investors in most market conditions, with capital protection being an important factor. We are targeting investors who don’t need their investment for five years, allowing the structured product investment strategy to work for them.”

Barclays Africa, Investec, Societe Generale and BNP Paribas see strong potential for structured products to gain attraction among South Africa’s retail investors.

“We are very excited to partner with ITransact as a provider of an investment product for their retail network through a life insurance wrapper,” says Haris Contaroudas, Managing Director at Societe Generale Corporate & Investment Banking. “Smart Trend is a capital guaranteed momentum strategy aimed at investors who expect the JSE Top 40 index to rise over the next five years, while being protected against downward trends.“

“The launch of a dedicated multi- issuer structured product platform is an important first for the South African market and is just another milestone in ensuring that investors and advisers ultimately have a wider choice from which to choose when making their vital asset allocation calls,” said Ryan Sydow, Head of Retail, Structured and Risk Solutions at Barclays Africa.

“Structured products are under utilised in the South African retail market compared to their European and US counterparts, yet their attributes lend themselves to being a well suited vehicle to use in the unsophisticated retail arena (for example explicit capital protection). Even the fixed terms nature of the products can be seen as positive (not a view shared by many detractors who see the terms as barrier to investing), given it stops investors, especially those with low market composure, from not staying the course.  

We look forward to being a participant and product provider on iStructure and look at the opportunity, not only to have investors support our product, but also to educating investors and advisers alike as we interact with them via this platform, Sydow concluded.”  

According to Investec’s Brian McMillan, Investec Structured Products has seen a distinct increase in the appetite for structured products attributable to four main factors; namely indexation, offshore access, yield pick-up and preservation of capital.

“The South African market has grown substantially since 2008 as investors have realised the benefits of capital preservation products, and the loosening of exchange controls has also seen investors accessing product issued offshore.” he said.  “Investec Structured products believes that the efficiency and accessibility granted to the South African financial advisor market via the iTransact platform will see an increase in the awareness and issuance of structured products in South Africa as a result.”

Commenting on behalf of BNP Paribas, Azad Mahavar, Head of UK, Nordic and CEEMEA Sales, Structured Equities & Commodities, said:  “BNP Paribas Structured Products provide simple, transparent access to a broad choice of asset classes aiming at capital preservation through a range of innovative structures. 

This allows private investors to build a diversified portfolio that is truly orientated to their individual needs and market views. Through iStructure, we now have in place the foundations to support our clients in ensuring they can continuously meet the needs of their customers. BNP Paribas is delighted to be chosen by iTransact as one of the four product providers at this important milestone.”

ABOUT ITRANSACT AND ISTRUCTURE iTransact is a division of Automated Outsourcing Services (AOS) which is one of the largest independent administrators of South African and international units trusts, mutual funds, ETFs, ETNs, hedge funds and listed structured products. Assets under administration exceed R140 billion. The iTransact investment platform was founded to combine all of AOS’ experience and technology to easily and efficiently distribute low cost index products and their benefits to financial advisers and their clients. iStructure adds a third leg to the ITransact product range which already includes the innovative “iSave” (ETFs and ETNs) and “iRetire”(Regulation 28 ETF portfolios). The iStructure range brings state-of-the-art structured products from banks such as Barclays Africa, Investec, Societe General and BNP Paribas within reach of retail investors who now have access to sophisticated investment products previously in the domain of institutional and high net worth individual investors.  

Issued on behalf of:  iTransact

Client contact:          Lance Solms Tel. 

No.:                        + 27 86 143 2383

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Editorial contact:      Kerry Botha

Tel. No.:                 083 263 0644

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