Talha Rahim, Thobekani Khanyile, & Pritu Makan
FNB 100 CapitalPreserver Participation 2 (ZAR)
The investment environment continues to experience heightened levels of volatility given current economic conditions across the globe, creating extremely cumbersome and turbulent conditions for investors. This, paired with domestic market conditions and economic constraints in South Africa (such as energy insecurity and general infrastructure challenges as well as the high inflationary environment), has resulted in market participants adopting a highly cautious or conservative approach with regards to investing.
Structured products provide an excellent tool for investors, especially those with a risk-adverse framework, to take part in market movements. In times of market uncertainty and volatile equity markets, many investors look for stability in their returns. Hence, these products give clients an opportunity to benefit from rising markets, or in the worst case get back their capital.
The FNB 100 CapitalPreserver Participation 2 (ZAR) is a five-year rand structured investment that provides 100% capital protection at maturity, along with exposure to Eurozone blue-chip companies (EuroStoxx50) and the EUR/ZAR exchange rate. The EuroStoxx50 Index captures the performance of the 50 largest companies by market capitalization in the Eurozone. The index captures 60% of the free-float market cap of the EURO STOXX Total Market Index (TMI).
The overall return is equal to the growth in the underlying index, multiplied by a participation factor. For illustration purposes, if the client is quoted an uncapped participation factor of 200% and the EuroStoxx50 index returned 120% over the term, the growth will be equal to 200% x 120% = 240% (before taking the EUR/ZAR exchange rate movement into account). It is important to note that if the performance of the index is flat or negative for the term of the product, the investor is still guaranteed 100% of their initial capital.
On maturity (after five years), the investor will receive:
Example: A client invests R1 million into the FNB 100% CapitalPreserver Participation 2 (ZAR) and the EuroStoxx50 Index goes up by 45% over the five years. At maturity, the client will receive R 1 900 000 [R1 million + (R1 million x (200% x 45%))] = R 1 900 000).
* EUR/ZAR rate has remained constant in this example. If EUR/ZAR was to appreciate/depreciate, it would decrease/increase the 200% participation rate.
An initial once off fee of 3% will be charged on the invested amount. This fee will not affect the guarantee and invested amount within the product as the fee is accounted for in the pricing of the participation. No additional distributor fees will be applied.
Back-test of EuroStoxx50 Index
The graph below highlights the periods when the EuroStoxx50 Index has delivered a performance over a five-year rolling period. Returns on the product are enhanced through the 200% participation factor, providing investors with an attractive investment opportunity.
Advantages and benefits
Risks
FNB Stockbroking and Portfolio Management view
How to apply
1. Investing in the product with your Share Investor Account
STEP 1: Set up a Share Investor Account if one is not held.
STEP 2: Send an email to shareinvesting@fnb.co.za or contact us on 087 346 8378 to place your trade. The information required in the email/ call will be a confirmation that you would like to participate in the product, your appropriate Share Investor Account number, how much you would like to invest and for you to then fund your account.
STEP 3: We will let you know when your investment is active.
STEP 4: You leave your investment to mature for five years.
2. Investing in the product with your Local Trader Platform Account
STEP 1: Set up a self-managed account if one is not held (please note this is free if you are a Private Client or Private Wealth client)
STEP 2: Log in to your account and navigate to “my portfolio/corporate actions” and select the offer and confirm the amount you would like to invest, to which you will fund your account.
STEP 3: We will let you know when your investment is active.
STEP 4: You leave your investment to mature for five years.
3. Invest via your Portfolio Manager or Wealth Manager
STEP 1: To find out more about the FNB 100 CapitalPresever Participation 2 (ZAR), speak to your Portfolio Manager, Wealth Manager, or Financial Advisor. During this stage of the process your advisor will discuss the available options and guide you as to whether this product is best suited to your investment needs.
STEP 2: Your respected advisor will help you complete the application process and ensure that all the requirements are met to enable the investment to be processed.
STEP 3: We will let you know when your investment is active.
STEP 4: You leave your investment to mature for five years.
Please note that if funds are not available in your account on the date of trade, your trade will not be placed and automatically cancelled.
Note: Investment statements will be available via the FNB App, shares.fnb, your Portfolio Manager or Wealth Manager.
