In part one of “Why Structured Investments?” we looked at why people invest their money and two of the most common ways in which people do it: bonds and equities.
Both options have advantages and disadvantages; bonds are safer but are unlikely to offer returns above and beyond inflation, while equities can beat inflation yet they expose the investor to higher risk.
If growing your wealth through bonds isn’t possible, then what about equities? Well, one of the biggest challenges of investing in companies is capturing and monetising the return.
Emma Davidson explains that the typical investor would need to hold stocks in a company like Apple for at least 10 years and usually more to maximise their investment.
“Vanguard, one of the biggest asset managers in the world, talks about a 40-year time horizon when contemplating investing in companies,” she states. “In summary, we need time and patience to benefit from equity markets.”
But what can people do if they are approaching retirement age or already enjoying their golden years? These investors do not have decades to wait for returns to stabilise across volatile markets; they require a predictable, dependable income stream.
Since setting up as an independent in 2011, we have made it our mission at Affinity Capital to redefine how structured investments are put together and traded.
By negotiating trade agreements with all the major international issuers and running our own pricing models, we’ve helped heighten the transparency and clarity around structures.
So how can this asset class provide the best of both worlds for retirees and other similar investors? Put simply, good-quality, wholesale structures are the ideal mix of bonds and equities.
“Affinity Capital uses the safety and predictability of bonds and combines it with predefined access to equities. This then creates a predefined and payable income,” Emma explains.
“Essentially, we look to capture 5-6 per cent growth every year, and we look to physically pay the returns out to clients. We believe there are bonds, there are equities and then there’s a third way: structured investments.”
Structures can evoke passionate responses from investors, with opinions often polarised as to their value.
Admittedly, there are some bad products out there, but Affinity has worked hard to revolutionise the space and create investments that offer an ideal balance of equity growth and risk-free bond elements.