SRP reviews how the various funds of structured products performed in September and Q3 2023.
In the final third part of this roundup, we review funds from Switzerland, Canada, Ireland and the UK. The first two articles can be found here (part 1 and part 2).
The objective of this Swiss open-ended fund is to provide an efficient investment in a diversified portfolio of barrier reverse convertible (BRC) products linked exclusively to equity indices of the major developed countries.
Stock indices faced a challenging environment in the third quarter […] initially positive, the trend reversed, and most markets were in decline in August and September - Vincent Bonnard, Finanzlab
The FTSE 100 was the only index used by fund showing a positive performance in September (+2.40%), with all other indices down, ranging from -1.72% for the Ibex 35 to -6.68% for the OMX Stockholm.
“Stock indices faced a challenging environment in the third quarter […] initially positive, the trend reversed, and most markets were in decline in August and September,” said Vincent Bonnard (pictured), founding partner, Finanzlab.
Thanks to defensive products, such as Luzerner Kantonalbank’s 6.6% pa Autocallable Multi BRC on Eurostoxx 50, S&P 500 and Swiss Market Index (SMI), with very low barriers and regular coupon payments, the fund again demonstrated its resilience in a difficult environment. It generated a slight positive performance of 0.08% for September while registering a positive return of 0.44% in Q3 and a year-to-date performance of +9.02%. Annualised volatility since the fund's inception stands at 5.66%.
Over the course of the month, one product was called and renewed with a Marex issued Phoenix callable note carrying a coupon of 6.75% and a European barrier at 50%.
“Taking advantage of available cash and repayments, we continued to diversify the portfolio by adding four new issuers, namely, Julius Bär, Marex, Basler Kantonalbank and CIBC,” said Bonnard.
By the end of September, the portfolio was invested at 97%, consisting of 11 products from nine different issuers, with the remaining three percent in cash. The average coupon, at 6.86% per annum in CHF has slightly improved compared to the previous quarter.
Assets under management (AuM) stood at CHF16.7m as of 30 September – an increase of 17.5% on the previous quarter.
“The fund's strong performance, along with regular media coverage, has allowed the fund to continue its growth,” said Bonnard, adding that the introduction of daily liquidity starting in early November, will open the fund to new investors.
As year-end approaches, Bonnard maintains a highly optimistic outlook. “The portfolio is currently well-positioned, with significant diversification in underlying assets, maturities, call types, and issuers. We continue to receive regular coupon payments, and with ample buffer to the barriers, any market recovery should immediately translate into a jump in the fund’s performance,” he said.
Finanzlab Multi Index Fund has CHF16.7m (€17.6m) AuM. The fund was launched on 20 October 2021. There is no minimum subscription. Key investor information risk and reward profile: three out of seven. The NAV as of 30 September 2023: CHF110.85.
This Dublin registered fund (Ucits V) offers actively managed exposure to a portfolio of autocallable structured products linked to major equity indices. The products are backed by G7 government bonds, reducing counterparty bank risk.
The fund registered a negative result of -2.98% for September, while its performance for the past three months, at -2.97%, was also negative. However, its YTD performance is positive (+10.43%) as is its performance over the past 12 months (+19.11%)
The current portfolio comprises 16 step-down autocalls, each linked to a worst-of basket of three indices – mainly benchmarks such as FTSE 100, S&P 500, Eurostoxx 50, Russell 2000, Nikkei 225 and SMI. These products pay an average coupon of 10.02% pa and their average distance above the final autocall barrier is six percent. If the product reaches the final observation date, the coupons are triggered if the underlying indices are above 80%, or in some cases, 75% of their initial level. All instruments are backed by G7 government bonds.
Twenty-one products have already matured, paying an average coupon of nine percent pa.
Causeway Securities Defined Growth Fund has US$22.8m (€21.5m) AuM. The fund was launched on 4 February 2020. The minimum subscription is $1,000. Key investor information risk and reward profile: six out of seven. NAV as of 30 September 2023: 1.0729 (USD Class A).
The Canadian fund is a defensive equity income strategy that seeks similar returns to many structured notes investments while offering a diversified downside buffer.
Its cash secured put selling strategy generates returns by selling laddered, out-the-money one-year put options on diversified global equity indices. In addition to collecting premiums on selling equity index puts, the fund gets the added benefit of generating a yield on money market securities held as collateral (secured), against the puts it has sold up to the total value of the portfolio.
The fund’s performance for September was stable, at 0.03%, while the YTD performance reached 4.94% at the end of the month.
In mid-September, a quarter of the options portfolio rolled into new one year put options. Most of the options portfolio at quarter end sit with strike prices greater than -15% below index levels with the weighted average strike price of the portfolio also below this level.
Ninepoint Target Income Fund has C$33.1m (€22.7m) AuM. The fund was launched on 29 July 2022. The minimum initial investment is C$500 with minimum subsequent investments of C$25. NAV as of 27 October 2023 is C$9.98 (€6.80).
ABN Amro Private Banking/Barclays Autocall Investment Fund
This Ucits fund is regulated by the Central Bank of Ireland and available for sale in Belgium, France, Germany, Ireland and the Netherlands.
Its portfolio of autocall products is managed by Barclays Investment Managers while ABN Amro provides the target parameters and any new autocall investments.
ABN Amro Private Banking/Barclays Autocall Investment Fund has €4m AuM. The fund was launched on 29 March 2021. Key investor information risk and reward profile: four out of seven. NAV as of 26 October 2023: €100.71.
DB Autocallable Portfolio Fund
This collective investment scheme, which is a sub fund of Prime Solutions Icav, aims to achieve capital appreciation over the medium to long term by investing in a portfolio of autocallable derivative contracts.
The portfolio consists of 120 euro-denominated autocallables with a five-year tenor. The annual coupon barrier and European barrier observed at maturity is set at 70%, while the annual autocall barrier is 100%,
DB Autocallable Portfolio Fund has US$2.75m (€2.60m) AuM. The fund was launched on 11 April 2023. Key investor information risk and reward profile: five out of seven. NAV as of 26 October 2023: US$9,683.55.