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Causeway Securities Structured Products Review

Causeway Securities Structured Products can be alternative investing options – but are they good enough? We’ll discuss the advantages and drawbacks of such investments later. For now, let’s learn about Causeway Securities and discover what structured products they are currently offering to investors.

If you want to invest as an expat or high-net-worth individual, you can email me (advice@adamfayed.com) or use these contact options.

Examine how Causeway Securities can fit into your international structured products strategy. This includes if you are looking for options that have a better risk-adjusted return.

Causeway Securities Background

Securities Brokerage firm Causeway Securities offers structured investments to individual and institutional clients. It is authorized by the Financial Conduct Authority and has offices in Ireland, London, South Africa, and the UAE.

Causeway Securities’ product structuring and distribution team has years of experience and regularly improves returns. Transparency, efficiency, and the development of long-term partnerships with customers are all given top priority at the organization.

The company, founded in April 2016, has since then helped organize investments totaling around $750 million across more than 500 Structured Products from its panel of partner banks.  Global stock markets and proprietary indices have issued these products in GBP, USD, EUR, JPY, AUD, and ZAR.

In an effort to shake up the traditional UK structured product market, Causeway Securities is developing new investing strategies. James Brearley & Sons Ltd has been appointed as the UK Plan Administrator to assure the quality of the scheme’s administration and custodial services. Before being released to the public, all goods are put through a thorough Product Governance procedure. Importantly, client funds are not held by Causeway Securities itself.

Structured Products Offering

Causeway Securities Structured Products  offering
Image from reliancesmartmoney.com

Structured Products Definition

With Structured Products, investors have the ability to tailor their portfolios to their preferred risk and return profiles. They have been increasingly important in recent years as a supplementary asset class to equity holdings in investment portfolios.

Causeway Securities’ structured product and deposit solutions effortlessly combine top-tier creation of concepts with a strong technology infrastructure. The availability of numerous counterparties, reasonable pricing, and effective lifecycle management are all advantages for the client.

Because they are based on deposits, structured deposit schemes are typically safe from the risk of the stock market on the maturity day. If the financial institution is a recognized deposit taker in the United Kingdom, your funds are additionally protected by the Financial Services Compensation Scheme.

Causeway Securities FTSE 100 4 year Defensive Deposit Plan

This four-year, deposit-based investment eyes a potential return of 100% if successful, plus a fixed interest payment of 28% of the principal invested. Those will be paid out only if, at maturity, the value of the underlying asset (the FTSE 100) is at least 90% of its price at the start of the investment period. Investors will not get an extra growth payment if the value is lesser than 90%.

Assuming the financial health of the bank holding your investment, you will receive your full initial investment back when the investment matures.

The product is a growth-type investment, so the target is to increase the initial investment amount’s worth.

The Royal Bank of Canada serves as the deposit taker for the investment. RBC, by market capitalization, is among the world’s largest banks.

The application deadline for checks is this coming August 30, 2023, while for bank transfers it’s September 1. The last day to request a transfer of funds from an individual savings account (ISA) was August 18.

Causeway Securities S&P 500 3 Year Defensive Deposit Plan

This deposit scheme, with a maturity of three years, expects to pay a profit of 20.35% once the investment terminates. The prospective earning corresponds to an annualized rate of 6.78%.

Like the investment discussed above, the payout is also tied to the performance of the underlying index, which in this case is the S&P 500. The value of the underlying asset at maturity must also be at least 90% of its worth when the investment period commenced. 

Barclays Bank plc is the deposit taker for this deposit-based, growth-type investment product.

The closing dates you must take note of are the same: Aug. 30 for applications by check, Sept. 1 for applications by bank transfers, and Aug. 18 for ISA transfers.

This structured investment is available on an advised basis. Meaning, you’ll need a financial advisor in order to acquire this product.

Causeway Securities UK/US Defensive Step Down Kick-Out Plan

The projected return on this investment opportunity is 10% per year, paid in whole without any deductions, and the maximum duration is six years. However, the expected earnings are linked to the performance of the FTSE 100 and S&P 500 indices.

The structured product fits the bill for both capital at risk and growth/kick-out categories of investments. Credit Agricole CIB acts as the plan’s counterparty.

If the closing value of both indices is at or above a defined kick out level on any observation date beginning at the end of the second year, the plan’s kick-out feature will be activated. If this occurs, investors will get back the total amount they first invested (initial capital) plus 10% annually for as long as the plan remains in effect. Two years after the initial investment, on September 2, 2025, the earliest observation date for this early maturity may occur.

With respect to the potential return of your invested amount, your initial capital will be reduced by 1% for every 1% that the final value of the worst-performing index on the final observation date is below its initial value (reflecting a drop of over 35% from the start).

It is possible to lose some or all of your money if the deposit taker experiences financial difficulties or goes bankrupt, regardless of how the indexes perform.

Furthermore, under current law and known HMRC (Her Majesty’s Revenue and Customs) procedures, any returns made from investing directly in this plan may be subject to capital gains tax. That’s something you have to check with your advisor or tax consultant.

The applications via check and bank transfer closed Aug. 23 and Aug. 25, respectively. ISA transfer applications ended Aug. 11.

Causeway Securities S&P 500 Kick-Out Deposit Plan

Causeway Securities Structured Products S&P 500 Kick-Out Deposit Plan
Image from Yahoo Finance

You can invest for up to six years in this structured product. Potential investment return is 7.30% per year the plan is in effect, but is only paid out in the event the plan kicks-out.

If, on any observation date, the underlying asset’s closing value is greater than or equal to 100% of its initial value, the plan is set up to execute a kick-out. In other words, if the investment achieves or exceeds the target return, the plan will end early and the return will be distributed. The kick-out provision will take effect on September 7, 2027, four years after the plan’s rollout.

Like the other structured products discussed, no additional returns will be paid if the underlying asset’s value at maturity is lower than its price at plan inception.

Nevertheless, the initial funds invested will be repaid at maturity no matter how the indices performed. This will rely on the deposit taker’s being financially sound.

With regards to the closing dates, application by check is on Aug. 29, by bank transfer Aug. 31, and for ISA transfer Aug. 17.

Causeway Securities FTSE 100 Fixed Monthly Income Deposit Plan

This five-year investment disburses a monthly guaranteed return of 0.3958% (representing an rate of 4.75% per year). This payout is given over the course of the investment and is unaffected by fluctuations in the FTSE 100 Index. Instead of focusing on capital growth, this seeks to produce income via regular payments.

On November 13, 2023, Causeway will send the first installment to the plan administrator, and every month after that. Please note that this plan can only be invested in with the help of a financial professional.

No matter how the investment does during the course of the term, you will get back the full amount you invested. Assuming the financial health of the institution holding your money, you are protected.

Investment execution and returns are the responsibility of the counter party, Royal Bank of Canada.

Should the value of the underlying asset hit at least 100% of its starting level on the final valuation date, a contingent return of 0.50% will be paid out. No such return will be given should the value drop below that rate.

Any income produced by individuals or trusts directly from this investment could be liable to income tax, based on applicable tax legislation.

ISA transfer applications will end Sept. 8. Check and bank applications will close Sept. 20 and 22, respectively.

What are structured products risks?

Much like any other type of investment, structured products have their own potential downsides.

Potential investor returns are usually tied to the value of the related index at its close on the dates specified in the plan. Different products have different types of anniversaries, such as the yearly kick-out date for kick-out products, the early maturity date and end date for growth products, and the annual income date for income products.

Should the index close below the level specified for the selected plan or its options on all applicable days, the plan or its options will not generate any returns.

Certain structured product plans are designed to give full protection against stock market risk upon the expiration of the term. But it’s important to understand that even if a structured product plan is intended to be completely protected from stock market risk at the end, it usually still carries issuer and counterparty bank risk.

In layman’s terms, the plan’s prospective returns and the repayment of the invested amount upon maturity are contingent on the issuer’s and the counterparty bank’s financial health. When these companies run into financial trouble or other difficulties, it’s likely that their investors will get back less than they put in — maybe even none at all.

It is crucial to understand that it is usually not possible to file a claim under the Financial Services Compensation Scheme in situations where the issuer and counterparty bank fail to satisfy their commitments or if the stock market index, to which a plan is tied, sees a fall.

Causeway Securities Structured Products Review Bottom Line

Most structured product returns and fund repayments depend on a stock market index, and the issuer and counterparty bank’s financial soundness.

Aside from knowing and understanding the risks that come with structured investments, you must read the plan brochure and key information document, and talk to your advisor.

When included in a varied and well-balanced portfolio, structured products can contribute to a successful investing plan.

Pained by financial indecision? Want to invest with Adam?

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Adam is an internationally recognised author on financial matters, with over 760.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.

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