INTERNATIONAL TITANS BASKET LIMITED
By Magnus L Heystek – Certified Financial Planner
At BRENTHURST WEALTH one of our roles is identifying new opportunities for investors. We regularly meet with the largest asset managers to review their offerings and where we deem necessary add or change to the solutions we offer clients. We undertake detailed and comprehensive research and follow a due diligence process before we make changes or add new recommendations.
We have identified a new investment opportunity that we are adding to our suite of investment options available to Brenthurst Wealth clients. In a world dominated by volatility and lukewarm economic activity in many countries, SA included, returns and risk must be carefully considered.
The product is an offshore product linked to global equity markets and comes with a minimum repayment of 105% of the invested capital, but with an upside of 150% of the invested amount over a 5-year period. This investment opportunity has been created by Investec Structured Products, a division of Investec Bank Ltd, which we are now making available to Bren-thurst clients. Investec is offering investors international equity exposure by means of the MSCI World Index, in the form of the INTERNATIONAL TITANS BASKET LIMITED.
It is an equity investment linked to the positive growth of the MSCI World Index, and provides investors with principal preservation, +5% of the initial investment, minimum return in US Dollar. In a world gone mad with volatility and uncertainty, investors can take risk, without having to take any risk.
INTERNATIONAL TITANS BASKET LIMITED
WE HAVE IDENTIFIED A NUMBER OF BENEFITS WITH THIS OPPORTUNITY:
The investment is a targeted 5 year offshore investment in US Dollar via the INTERNATIONAL TITANS BASKET LIMITED; a company based in Guernsey and listed on the Bermuda Stock Exchange. Investors will be buying shares of the company within the investment structure, which is fixed for a term of 5 years.
This investment is linked to positive growth of the MSCI World Index after a 5% upside. In fact, 2x the growth, up to a limit of 27.5% (of the benchmark), with a potential maximum return from the investment in the shares settling at 50%.
Investors can invest knowing there is a 105% principal [capital] preservation in US Dollar meaning that if the index were to fall by 20% over the 5 year term, the capital returned after that same time would amount to 105% of the initial investment.
HOW CAN THIS BE BEST EXPLAINED?
ASSUMING THE BASKET STARTS USD 100 EQUIVALENT, BELOW IS AN EXAMPLE OF EXPECTED RETURN **
INDEX RETURNS (AFTER 5 YEARS)
HOW DOES THE PERFORMANCE WORK?
INVESTORS ARE PROVIDED WITH DOUBLE THE INDEX’S PERFORMANCE AFTER THE FIRST 5% IN POSITIVE YIELD.
1: THE FIRST LINE represents a downside scenario; the index returns -20% after 5 years, but the investor still has 105% returned, due to the principal preservation. The 5% is provided due to the investment structure, hence the 5 year restriction on the investment.
2: THE SECOND LINE, following with the 2x gearing, represents a total return of 25%, as the structure provides 2x gearing after 5%. There was a return of 10% above the 5% (total of 15%) but the gearing is only calculated on the 10%. This works out to 5% + 10% (x2) for a total return of 25%.
3: THE THIRD LINE indicates the best case scenario. The index provided a 35% return, but as the returns are limited to 27.5% positive yield from the index, the maximum amount is therefore limited to 50%. Using the same formula above:
5% + 22.5% (X2) = 50% RETURNS ALL RETURNS ARE BASED IN US DOLLAR.
This investment provides investors with exposure to diversified sectors and companies an opportunity to make a geared return from positive movements in the MSCI World Index over the investment term (subject to the maximum return level), in US Dollar.
INVESTMENT MINIMUMS AND ROLL-OVER
The minimum investment amount is $12 000 (+/- R160 000), which makes it extremely accessible for investors looking to diversify their current portfolios. Investors can make use of their SDA (single discretionary allowance) or if needed, apply for a tax clearance certificate. Investors who subscribe now will also be allowed to reinvest for a second term after the initial 5 year term (limited to one rollover – total of 10 years).
This is a limited offer from Investec, and the closing date is the 3rd of October 2016. Due to the admin intensive nature of this investment, it is recommended that all applications be submitted and all forex and tax clearance certificates issued at least a week before the closing date.
This investment is fixed for 5 years, but investors can sell their shares to a willing buyer in the event of requiring the capital, but a penalty will be levied at 1.25% of the capital amount of the investment.
HISTORICAL PERFROMANCE AND CORRELATION TO MCSI WORLD INDEX
As the above graphs indicate, the investment is correlated directly with the MSCI World Index, and has a standing 5 year track record. In rand terms, previous investment subscribers benefited from a return of 150% in ZAR terms, versus the same investment made on the JSE returning only 90% including dividends. As with any investment, returns are not guaranteed, but investors will be provided with principal preservation, and a bit more peace of mind.