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Three and Five Year Fixed Income Bonds
Launched in December 2018 this secured fixed income bond from a UK PLC is available as a three year direct or a five year
platform investment and has been designed for clients who want high security and an above average return, without locking their capital up long term.
1. Assets secured against liquid capital.
This means that client funds are being secured against liquid assets, mainly cash and quoted stocks that are fully owned by the company.
2. Quarterly Income Payments
A large percentage of bonds offer semi annual coupons meaning that investors have to wait up to 6 months to see any returns. Quarterly payments provide a more immediate return on investment and can be used as designed.
3. Full access every 12 months (at zero cost)
Providing full access every 12 months allows an investor to benefit from being able to access their capital should their circumstances change. Experience tells us that most investors won't actually use the facility but having it there provides peace of mind and an additional layer of security. Additionally there are zero costs to investors who choose to redeem before the end of the 3 year term.
4. Direct Investment or via selected platforms
The three year bond is a 'Direct to issuer' investment and the five year bond is available via a selection of offshore investment platforms.
Fixed Income Bond Performance as of February 2023
The chart depicts the returns that an investor would have from investing $125,000 in February 2019 from the 14% pa fixed income bond. Steady performance & high capital security returning 56% to date, means that investors will have received $69,995 in coupon payments with their principle investment available for full redemption on any investment anniversary. The illustration is the same for an investment in GBP and EURO.
Comparing the market
The key point to note regarding the fixed income bond in comparison to traditional asset classes is volatility. The below table and chart shows the difference between the performance of the fixed return of the bond vs asset classes affected by the volatility of the global financial markets over the same period of time.
Market Conditions vs. The Bond.
Beyond the obvious tragedy of the event, the invasion of Ukraine by Russia caused stock markets around the world to drop and created uncertainty & fear for many investors. This, along with the ripple effects of the pandemic has caused many investors to seek steadier returns that are not affected by current geopolitical tensions.
Inflation is rising worldwide & talks of a global recession are becoming common place. Energy prices globally are rising, causing a cost of living crisis.
Although these issues are very real and will affect 'traditional' portfolios and 'traditional' asset classes, we are pleased to confirm that the bonds' investment strategy is not connected to equities and stock markets. The bond generates its returns from the international foreign exchange markets.
Maintaining a diversified strategy amongst many currency pairs means that the bond and its investments are not exposed to the events unfolding in Ukraine. Specifically the FX traders use neither the Ukrainian Hyrvnia nor the Russian Ruble within the portfolio.
Concerning wider FX risk, the bond also trades in currencies outside of the European continent. This counter balances any impact of short term geopolitical risk associated with European and Russian activities, on European related currency pairs.
Equities, Gilts and Commodities have all been hugely affected by world events over the last few months. This is likely to continue as events unfold further, with the ongoing potential for greater volatility and uncertainty.
The bond however does not invest in those markets.
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