1. STRUCTURED PRODUCT PORTFOLIOS
DAVID STUFF
CUBE INVESTING

2. INTRODUCTION Understand the returns that structured products offer
Appreciate when are they suitable and appropriate
Know how a managed portfolio of structured products works
Understand the benefits for investors
Understand the benefits for advisers

3. CUBE INVESTING
Independent provider of research on all retail structured products
Work with advisers to help select the best, most suitable and appropriate product
Work with investment managers that use structured products
Act as a product manufacturer / arranger
Developed the managed portfolio concept, defined portfolio mandates
Responsible for products and distribution

4. Understanding structured products
WHAT YOU GET TOLD
WHAT YOU NEED TO KNOW
How the return is calculated
How the income is calculated
How the final value is calculated
Issuer risk
What return can I expect?
What is the chance of getting this return?
What are the risks?
What is the chance you could lose money?
How much money could you lose?

5. Kick-Out | barrier | payoff
WHAT YOU GET TOLD
Issuer
Underlying: FTSE
Maximum term: 6 years
100% Kick-Out level each year
Potential 10% return each year if the note kicks out
No income
Capital at risk if the index has dropped by more than 40% over 6 years

6. Product analysis WHAT YOU NEED TO KNOW WHAT DOES THIS MEAN?
58% chance of 1st Kick Out, return 10% per annum
88% chance of kick-out at some stage and then the conditional gain is 9.7% pa
9% chance of no return
3% chance of loss, and then the average pay-out is 49%
5.7% Average Return
9.9% Volatility
The level of volatility means that this is a Cautious product, SRRI 5.
Very low chance of loss, so suitable for clients wanting to avoid losses
High conditional return will be received even if markets only slightly up. Suitable for clients that want to make money in most market conditions

7. Distribution of returns
Chart shows the expected returns of 3 assets
This Autocall
All current retail products
FTSE Tracker Fund
Analysis shows that structured products offer the sort of return that many investors want
A high chance of a good return (5% to 10%)
A degree of protection

8. FTSE structured products vs ftse tracker
Compare annual return of FTSE Autocalls that have matured versus FTSE iShare return over the same period
65% of FTSE Autocalls delivered a higher return than the iShare
Outperformance strongest when FTSE returns are lower

9. WHY we like structured products
Positive returns when markets are flat
Protection against loss
Simple to understand

10. Adviser perspective BENEFITS PROBLEMS Good historic returns
No requirement for underlying growth
Clear outcomes
Risks are obvious and transparent
Clear materials
Low fees and charges
Risk that investors don’t understand
Transactional model; time and effort
Does not fit modern fee structure
Does not fit with model portfolios
Difficult to demonstrate suitability
Issuer default risk?
Not very liquid?

11. The solution: A Managed portfolio service
Discretionary Management Service
Aiming for positive returns under most market conditions
Invests exclusively in structured products

12. How does A SP mps work?
Similar to a standard managed portfolio service
Invests in structured products rather than funds
Investment manager determines the weights and holdings of each portfolio
All of the notes in the portfolio can be bought and sold every day
Each investor owns each of the underlying notes
New investors buy each note at the prevailing market price
New investment will be executed once the funds have cleared
Redemptions will be executed immediately

13. Diversification | risk management
Issuer Diversification / credit quality
Limit maximum exposure to any issuer
Investment rating| credit default swap
Diversification
Underlying market
Strike date | strike level
Risk
Target maximum portfolio and product volatility
Active risk management

14. Managed portfolio BENEFITS
EXPERT MANAGEMENT
BETTER PRODUCTS
The investment manager is responsible for product selection
Maximize return / minimise risks
Dedicated expert managers
Screen over 3,000 existing products
Create bespoke products
Active management
DFM can invest in institutional products and create new products
No fees in the products
No plan management fees
Better terms
More liquidity
More issuers

15. Benefits for investors
Attractive risk and return
Expert management; controls risk, maximizes return
Diversification; issuer, markets, dates
Less effort required; manager makes all the decisions
Access to institutional Products; better terms, more issuers
Buy and sell as required
Quarterly income
ISA and SIPP

16. Benefits for advisers
Open-ended; buy and sell at a time that suits the investor
Eliminate risks of missing investment deadline from delays transferring assets
Saves time and effort picking products
Reduced advice risk because there is a clear objective and risk graded
Active risk management; maximizes return and manages risk
Initial and annual fees
Complements managed portfolios

17. Cube managed portfolios
Product Details

18. The 3 cube portfolios CAUTIOUS RETURN CAUTIOUS INCOME BALANCED GROWTH
10% maximum volatility
6% to 8% growth
No income
CAUTIOUS INCOME
6% to 8% quarterly income
Capital preservation
BALANCED GROWTH
15% maximum volatility
Income and growth
7% to 9% total return
Quarterly income

19. The team Investment manager Administration Custody Valuations
Reporting
Applications
Adviser fees
Design and development of MPS
Portfolio mandates
Product and portfolio analysis
Secondary market
Bespoke product development
Marketing
Distribution

20. Brochures and marketing material
What we offer / managed portfolio
Brochures
Application forms
Portfolio summary documents
Fact sheets
Product descriptions
Links to James Brearley and Sons site

21. Wrappers and charges WRAPPERS FEES AND CHARGES ISA Pensions
General Investment
Offshore Bonds
1% per annum AMC
0.5% initial charge
£2.00 per income payment
No dealing charges
No product fees or charges

22. Reporting Website: https://www.jbrearley.co.uk
Select: Private Client Login
Username: bre142391
Password:  Spmodel
Select: "Client" from the options on the left
Select: the Portfolio option for each portfolio

23. Learning objectives What sort of returns do structured products offer?
When may structured products be suitable and appropriate?
How does a managed portfolio of structured products works?
What are the benefits for investors?
What are the benefits for advisers?

24. contacts CUBE James Brearley and Sons David Stuff CEO
Steve Denton
Business development
David Hannis