CUBE INVESTING
Are Structured Products an alternative to Absolute Return Funds?

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For many investors and advisers Absolute Return Funds seemed like a panacea when they were first introduced.  The promise of positive returns under most market conditions and low volatility is attractive. Sophisticated managers investing in esoteric markets exploiting hidden sources of return and value offered investors access to this investment nirvana. Unfortunately, the reality has not turned out as expected for some of the largest and most popular funds.  Dreary performance and opaque strategies have left many investors disappointed.

Structured products offer a simpler and easier route to a similar return profile.

- Positive returns under most market conditions with low volatility.
- Most product do not need the underlying markets to rise to generate a positive return.  Many products will offer a positive return even if markets fall.
- The market conditions required to generate a return are clear and easy to understand, we can calculate how likely it is that investors will get a positive return.
- The situations where the final value will be less than 100% are clearly defined.  The risk investors face is easy to describe and understand, and we can quantify this risk.

Our index of UK Autocalls is up by 16.7% over the last three years.  This is slightly less than the FTSE iShare we use as a benchmark, but volatility is significantly lower; 9% versus 15%.  Over the longer term as you can see in the chart below the Autocall index is significantly above the iShare.  The returns offered should not be a surprise, these products have simply delivered what they promised.  However, it is still good to see that the realised mark-to-market performance matches the returns that were promised.  Looking forward the appeal of structured products looks stronger than ever.

- Structured products can be used to replace equity market exposure.  They offer an equity linked return with a significant amount of protection.
- Structured products can replace bonds.  They offer higher returns with clear risks.
- Structured products can replace absolute return funds.  Investors can understand when they will work, and the risks that they face.


Advisers have several ways to get structured product exposure:

- The Managed Portfolios from James Brearley offer access to a diversified basket of institutional products.  Investors benefit from instant diversification, managed reinvestment, expert product selection and the ability to invest and redeem at any time.
- There is a large selection of individual plans.  Our analysis of risk and return allows advisers to select the plan that is suitable and appropriate.  The list below show the products we have added recently.

Walker Crips Annual Growth Plan Issue 49
CUBE Soft protection 50% European
CUBE Accrues 8.0%pa until kickout or maturity. Kicks out if the index closes at or above 100% of its starting level
CUBE Click here for more details
Walker Crips Annual Step Down Plan Issue 5
CUBE Soft protection 50% European
CUBE Accrues 6%pa until kickout or maturity. Kicks out annually from the 2nd anniversary if the index closes at or above a decreasing level: 100% for year 2 reducing 5% annually thereafter
CUBE Click here for more details
Mariana 10 10 Plan April 2017 Option 1
CUBE Capital protection, subject to 70% European barrier.
CUBE Kicks out from year three paying 7.0% for each year elapsed provided the index is at or above 90% of its initial level.
CUBE Click here for more details
Mariana 10 10 Plan April 2017 Option 2
CUBE Capital protection, subject to 70% European barrier.
CUBE Kicks out from year three paying 9.0% for each year elapsed provided the index is at or above 100% of its initial level.
CUBE Click here for more details
Mariana 10 10 Plan April 2017 Option 3
CUBE Capital protection, subject to 70% European barrier.
CUBE Kicks out from year three paying 11.75% for each year elapsed provided the index is at or above 110% of its initial level.
CUBE Click here for more details
Mariana FTSE Defensive Income Kick Out Plan April 2017
CUBE Pays out 1.80% on any quarterly observation for which the underlying closes at or above 75% of its starting level
CUBE Soft protection 60% European
CUBE Kicks out on the first quarterly observation starting with the 4th for which the underlying closes at or above 110% of its starting level
CUBE Click here for more details
CUBE
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louise.parker@cubeinvesting.com
CUBE and CUBE Investing are trading names of CET Capital Ltd. CET Capital Ltd. a company registered in England no. 04986900, is authorised and regulated by the Financial Conduct Authority no. 446267.

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