Structured Notes – A Knight in Shining Armour.
The world is in a permacrisis.
A permanent crisis that is dragging on ad infinitum. A war in Ukraine, inflation, higher interest rates, a threat of a recession with the subsequent melt down of the equities market. Which begs the trillion Dollar question:
“How does one invest in such a volatile environment?“
It is foolish to simply invest in the financial markets, because “…over time the markets always rise!”
Many so called investment advisers (some with decades of experience, brandishing multiple qualifications and accreditations too) preach this nonsense.
Like ostriches with their heads stuck in sand, these foolish pundits have developed a scotoma to the real scenario of a prolonged market decline.
Unlike the foolish pundits, we have considered this likelihood in the financial planning of our clients. All of our solutions include capital protection. There are three ways to do so, specifically for South Africans, but in this write up, we are going to concentrate on one: structured notes.
Investopedia does a good job explaining structured notes, summarised in the picture below.
Virtual Adviser has modified traditional structured notes
In conjunction with a fast growing and leading international securities house in South Africa, we at Virtual Adviser, have introduced a solution that mitigates the traditional risks that come with structured notes.
- We have removed the market risk by making the capital invested guaranteed.
- We made the instrument easier to invest in
- You can track a Rand denominated index with monies in South Africa
- Or move money offshore into Dollars
- Or move your offshore dollars into structured notes
There’s more.
We wrapped the structured notes into an international endowment (100 of them), that provide the following additional benefits.
- By having an endowment wrapper, you bypass probate. Meaning that the funds will have a beneficiary, thus you do not need an expensive foreign trust or a Will domiciled in a foreign country.
- Furthermore, the investment will not form part of your South African estate, hence it will be free from estate duties and executor fees and not frozen while your deceased estate is being wound up.
- Why a hundred mini-endowments? To create liquidity otherwise not available in structured notes.
- Being wrapped in an endowment structure, the tax is limited to 30%. This is an ideal solution for high networth individuals.
- Our provider that we partnered with has made the deal sweeter – upto 130% boost on the underlying return is now available.
And there’s even more….
If you approach us as group of investors and want a tailor made structured note, we can do this for you. The minimum investment amount is R20million.
For example, you are a medical specialist and you and your team of specialist doctors have keen, often better insight than hedge fund managers, on the expected performance of a few listed international medical companies.
You want to invest in them in a risk averse way. You also want the protection and the benfits described above.
Contact Jitesh Jairam, our lead investment adviser and CEO.
We have been developing real and value adding solutions for our valued clients.
Solutions that are relevant for the current times.
Isn’t it time you you made Jitesh Jairam your lead investment adviser?
Together with his team of experts at Virtual Adviser we will go a long way in adding value to your portfolio.
Not just to your personal investment portfolio, we can turn around the performance of your business investment portfolio too.
Contact Jitesh directly on 083 218 8966 or via email – [email protected].
Virtual Adviser. So much more than quality financial advice!
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Herwith follows a rather detailed article on structured notes drafted by the Virtual Adviser team.
What are structured notes in the investment world?
Investing can be a daunting process. With so many options to choose from, it’s hard to know which route is the best for your specific goals and needs. But one investment option that has been gaining traction in recent years is what is known as structured notes. Structured notes are a type of security that combines features of both debt and equity investments. They offer investors more control over their portfolio than traditional investments and can provide access to high-yield investments with low risk. In this article, we’ll take a closer look at what structured notes are, who should use them, and how they can fit into an overall investment strategy.
What are structured notes?
Structured notes are a type of investment product that combines features of both debt and equity. They are typically issued by banks and other financial institutions, and can be used to finance a wide variety of investments.
Structured notes typically have a fixed term, and pay interest at a fixed rate. However, the principal amount of the investment may be linked to the performance of one or more underlying assets, such as stocks, bonds, commodities, or currencies. This means that the investor’s return may be higher or lower than the interest rate paid on the note, depending on how the underlying assets perform.
Structured notes can be an attractive investment for those seeking higher returns than what is currently available on safe, fixed-income investments. However, they also come with higher risks, as the value of the investment may fluctuate more than traditional debt instruments. As such, structured notes may not be suitable for all investors.
What are the benefits of investing in these notes?
There are many benefits, including:
1. Risk management: By investing in a note with a predetermined maturity date, you can help manage your overall portfolio risk.
2. Enhanced yield: Many structured notes offer enhanced yields relative to other fixed-income investments.
3. Customization: They can be customized to meet your specific investment goals and objectives.
4. Tax advantages: In some cases, the interest payments on these notes may be tax-advantaged.
5. Liquidity: These notes typically offer liquidity features (when modified like we do) that allow you to access your funds prior to maturity, if needed.
Who should use them?
Whether you’re a beginner investor or a seasoned pro, structured notes can be a helpful tool in your investment arsenal. For beginner investors, structured notes can provide guidance and discipline when making investment decisions. For more experienced investors, these notes can offer an opportunity to achieve higher returns or take on less risk.
So, who should use structured notes? The answer may depend on your investment goals and objectives. But in general, if you’re looking for a way to potentially boost returns or reduce risk in your portfolio, structured notes could be worth considering.
How to invest in these structured notes
Structured notes are a type of investment that can offer investors a higher potential return than traditional investments, but they also come with higher risks. Structured notes are not suitable for all investors and you should only invest in them if you are comfortable with the risks involved.
Here is a step-by-step guide on how to invest in structured notes:
1. Decide what type of structured note you want to invest in. There are two main types of structured notes – principal protected and unsecured. Principal protected structured notes offer some protection of your initial investment, while unsecured structured notes do not.
2. Research the issuer. It is important to make sure that the issuer is reputable and has a good track record. We have already done the research!
3. Consider the fees involved. Structured notes often have high fees, so you need to make sure that the potential return is worth the fees charged. We charge a once off nominal fee. No annual charges.
4. Understand the terms and conditions of the investment. Make sure you fully understand how the investment works before investing any money.
5. Decide how long you want to invest for. They typically have a fixed term, so you need to decide whether you are comfortable with this before investing. We recommend a minimum of 5 years, commensurate with the endowment wrapper minimum term.
6. Invest your money and monitor your investment carefully. Once you have invested in a structured note, it is important to monitor it closely to ensure that it is performing as expected and that there are no unexpected changes or events. This would be the case if there were no guarantees in place. If you take the investment with Jitesh Jairam, you will never have to constantly monitor the investment.
Conclusion
Structured notes are an important part of the investment world, offering investors a chance to diversify their portfolios and access alternative investments. They can be beneficial for a variety of investors, including those looking for higher yields than traditional bonds offer or those seeking portfolio protection in times of downturns.