Specialised Investments Simplified

Welcome to this week’s Specialised Investments newsletter, written by one of our fantastic team members, Lucy Wylde . In this edition, Lucy delves into the latest market developments, providing valuable insights on structured products, cryptocurrency trends, and the impact of recent economic events.

August began with disappointment and panic amid fears that the US economy could fall into a recession, rather than “achieving the soft landing investors have been banking on,” according to Angharad Carrick of This is Money.

Concerns about a US recession were stirred by data showing that far fewer jobs were created in July than estimated, while the unemployment rate continued to rise. This was compounded by the Federal Reserve's decision to hold interest rates steady, whereas other central banks, such as the Bank of England, cut interest rates for the first time in more than four years.

Globally, stock indices plummeted, with Tokyo’s Nikkei index taking the brunt of the dip, plunging over 12%—the index’s largest crash since 1987’s 'Black Monday.'

The above, along with increased violence seen across the UK in early August, had a knock-on effect on the FTSE 100, which closed below its near-record high value of 8,000. That said, overall in 2024, the FTSE 100 has averaged a monthly value of 8,253.97, according to structuredproductreview.com.

It is therefore unlikely that most investors in UK retail structured products will have been phased by these events, due to the defined contractual returns, longer-term durations, and built-in protection.

With that in mind, let’s recap the latest maturities of 2024.

Structured Products Maturities - The UK Retail Sector

When considering the maturity results in recent months, August recorded a total of 73 structured product maturities, 72% of which were linked to the FTSE 100.

Furthermore, the majority of these maturities triggered early, thanks to elevated stock market levels, while only 5 autocalls in August matured on their final observation date.

Focusing on capital-at-risk autocalls, the average annualised returns were 7.18% over an average duration of 2.63 years.

Autocalls linked solely to the FTSE 100 or FTSE CSDI outperformed the sector by 0.65%, returning 7.83% over an average term of 2.58 years.

No deposit-based contracts matured last month.

The outstanding maturities, with final gains of 80%, 73.50%, and 60% respectively, were the Tempo Structured Products FTSE 100 FDEW Long Growth Accelerator Plan August 2019 - Option 1, FTSE 100 FDEW Long Kick-Out Plan August 2019 - Option 3, and the Mariana FTSE 150 Kick Out Plan August 2020.

Despite the FTSE being slightly below its recent all-time highs, it is expected that September will bring further generous maturities.

Cryptocurrency

Following the Federal Reserve’s decision to hold interest rates earlier in the year, the reverberations of its latest move to cut interest rates are also being felt throughout the world of cryptocurrency.

According to CNBC, despite rising by 12% in the past week, Bitcoin's value is now fluctuating between a 1% gain and a 1% loss following the news of the rate cuts, while Ether has fallen by almost 2% (as of 18th September 2024).

Data has also shown that it is becoming increasingly difficult to make money from crypto mining, partly due to the all-time high hash rate (the combined computing power of all miners within the Bitcoin network).

As a result of the significantly increased presence of crypto miners, since Bitcoin has become a more established—arguably mainstream—part of the economy, the investment banking company Jefferies Group reported that mining was considerably less profitable in August. According to Jefferies Group, the “average daily revenue per exahash, or income per miner, fell by 11.8% from the prior month.”

In potentially better news, US asset manager Janus Henderson is preparing to become the latest large asset manager to experiment with securities tokenisation by assuming management of the Anemoy Liquid Treasury Fund. The Anemoy Liquid Treasury Fund is an open-ended, British Virgin Islands-domiciled fund that invests in short-term US Treasury bills. The fund, launched in December, is open to non-US professional investors.

This move sees Janus Henderson following in the footsteps of BlackRock, Fidelity International, and Franklin Templeton, all of which are already running tokenised Treasury or money market funds on public blockchains.

Finally, after more than a month of vague descriptions and promises from former President Donald Trump and his family, new details have been released about the family’s new crypto venture, World Liberty Financial.

The launch event, held on X (formerly Twitter), suggested that World Liberty Financial will be something akin to a banking platform, where the general public will be encouraged to borrow, lend, and invest in cryptocurrency.

It was announced that 20% of the project’s tokens will be allotted to the founding team of World Liberty Financial, while 17% of tokens are to be set aside for user rewards, and the remaining 63% of the coins will be made available for the public to purchase. There will be no pre-sales or early buy-ins, however.

As the financial landscape continues to evolve, staying informed is essential. If you’re looking to optimise or review your Centralised Investment Proposition (CIP) or Centralised Retirement Proposition (CRP), our team is here to support you. We specialise in helping firms create and refine these strategies to ensure they align with both regulatory requirements and your clients’ needs.

Contact us today to see how we can help enhance your proposition and deliver better outcomes.