A global portfolio with unlimited growth and limited risk
Liberty’s newly launched Advanced Global Equity T1 portfolio is aimed at providing investors with simple, taxefficient offshore exposure.
if you’re looking to diversify your investment to gain exposure to offshore markets with a sound safety net and tax-efficiency, there’s a compelling case to be made for Liberty’s Advanced Global Equity T1 Portfolio. “Brand new, just launched and offered through the group’s ‘Evolve Investment Plan’, it’s a structured portfolio that’s simple, fully transparent and allows clients to see what they get,” Vimal Chagan, Liberty’s divisional director for investment propositions, explains.
Chagan, who joined Liberty a year ago, is tasked with developing a functional investments operating model within the group’s retail business.
Though not having played in the structured products market for some time, Liberty has identified a gap in the market to assist those investors who are understandably concerned about local savings and investments being eroded over time – and are nervous about investing offshore.
The Advanced Global Equity T1 portfolio offers clients unlimited investment growth while significantly reducing risk on the original investment, meaning that they can grow and preserve their investment, regardless of market conditions, says Chagan.
For a minimum investment of R150 000, clients have access to a five-year portfolio of an equally-weighted basket of offshore capital indices, namely the S&P 500 and Euro Stoxx 50, providing exposure to some of the largest companies in the US and Europe while ensuring a safety net on their initial investment to guard against market volatility.
Regardless of how far markets fall, Liberty will return the investor’s investment amount after initial fees, and this is based on BNP Paribas’s credit risk, says Chagan. Even if returns are 0.1% after 5 years, the investor will get at least 10% a year, after fees and taxes. If markets perform exceptionally well and exceed that 10% return, they benefit from the full after-tax return after tax adjustments.
A significant plus is that there is no currency exposure, and if, say, the rand continues to weaken (or conversely strengthens), the rand investment returns will not be affected.
Returns are calculated in a simple way, Chagan explains. “At year five, if the index grew, your investment would also have grown. In this manner, you benefit from the performance of the index. Naturally, of course, the value of the investment can be different during the term in comparison to its value at year five.
“A further attractive factor is that because the Advanced Global Equity portfolio is structured as an endowment, it has a tax-efficient design and returns are taxed within it. The net return is therefore yours as there’s no further taxation and you don’t need to get involved in tax administration hassles.”
Investments in excess of R1m receive an enhancement of 1% on the investor’s lump-sum investment, and investments in excess of R3m receive an enhancement of 2% on the lump-sum investment amount, Chagan adds.
“If you invest R1m, we will invest an extra R10 000 on your behalf, and similarly, if you invest R3m, we will invest an extra R60 000 on your behalf.”
A deemed risk in Advanced Global Equity’s overall structure would be a financial collapse by PNB Paribas, resulting in capital loss to the investor. Never say never, but this is highly unlikely in the foreseeable future. Paris-based PNB Paribas is the world’s eighth largest bank with a presence in 77 countries. Fitch has given it an A+ international rating.
Changes to tax could also negatively impact on returns.
The five-year investment period starts on 7 December 2018 for all portfolio investors. Liberty is already accepting amounts, which are being placed in a money market fund until the portfolio commencement date. Returns will be invested in the Advanced Global Equity portfolio.
Regarding withdrawals by clients for emergency purposes, they are afforded emergency access to their money, says Chagan. “One early withdrawal of all, or a portion of the invested funds, can be made during the term.
“While there is no charge for an early withdrawal, it’s important to remember that the portfolio isn’t guaranteed during the five-year period, but only on completion of the five years. Investors, as such, should ideally remain fully invested for the five-year term.” ■
For a minimum investment of R150 000, clients have access to a five-year portfolio of an equally-weighted basket of offshore capital indices, namely the S&P 500 and Euro Stoxx 50.
Divisional director for investment propositions at Liberty