Structured portfolios enjoying investment levels last seen in the 1990s, says Liberty

South Africans have made an approximately R17.5bn return to the world of structured investments, reflecting the need for solutions that provide some level of security and certainty with competitive yields, says Liberty.

Enjoying investment levels last seen in the 1990s, the change towards structured portfolio investments at Liberty is being bolstered by upper affluent and high-net-worth individuals with a minimum of R250,000 to invest and companies seeking to ensure returns to meet future-specific corporate objectives, says Luvhani Makoni, lead specialist of Investment Propositions at Liberty.

Liberty, with its Structured Performer V5, is providing retail investors and companies with an avenue to gain access to these solutions.

To date, says Makoni, structured investment sales in SA are estimated at between R17.5bn and R26bn, while the euro market has attracted between $150bn and $200bn. For some investors, investing now is seen as a chance to lock in higher returns than would be the case later when interest rates are adjusted downwards in line with expectations.   

“Structured investments have some level of risk, but have become increasingly popular because of the upside return potential linked to the performance of underlying indices,  and the security that they offer due to the level of protection.

“Liberty’s latest offering of structured portfolios has the added attraction of giving clients international exposure while being rand-denominated investments. This is the case with the Liberty Structured Global Performer V5, which has an equal weighting of 50% to the S&P 500 and 50% to the EURO STOXX 50 indices.”

The highly popular Liberty Structured Global Performer ESG V5 portfolio also offers socially responsible investors the opportunity to honour their principles with an additional layer of environmental, social and governance consideration.

“Additional benefits of investing in a structured portfolio include a level of capital protection — if the value of the basket does not fall by more than 30%. In Liberty’s approach, all returns are quoted after fees and after taxes.” 

As with all investments there are various ways to invest in structured solutions: wrapped structures, direct structured deposits or notes, says Makoni, and the type of structure selected depends on the client and their specific financial goal. 

From a Liberty perspective, structured portfolios offered within an endowment give individual investors the best of both worlds — the benefits of a structure as well as that of the Liberty Range (previously Evolve) where these solutions are offered. 

“For affluent investors, the primary benefit is that in the endowment structure tax is capped, making the option a more tax efficient way of investing,” says Makoni. 

“From an estate planning point of view, investors can nominate beneficiaries. Providing further value is that the death benefit offered on the Liberty Range ensures that clients can leave their loved ones with their investments at its peak value.

“Investors can leave their loved ones the greater of the investment value based on portfolio sell price on the date Liberty receives notification plus an enhancement or the lump sum investment amount (less advice fees and any previous withdrawals).” 

The appeal of structured investment portfolios for companies lies in the certainty they provide. Companies know the value of their maturing investments upfront, facilitating long-term planning.

“Liberty re-entered the structured investment market in 2018. Since then, we have had two structured portfolios mature, the first being the first tranche of the Liberty Advanced Global Equity portfolio which matured in December 2023 and the second tranche in August 2024. Both tranches delivered the expected results for both individuals invested in the Liberty Range and companies in the Liberty Range's sinking fund,” says Makoni. 

“Our structured portfolios have been well supported with our biggest tranche reaching over R1bn in 2023. These results indicate the growing demand and needs of investors for an investment solution that provides some level of certainty where there may have been uncertainty in the system. 

“We don’t doubt that the intense activity surrounding structured investment portfolios will continue well into the future as South Africans seek value as they navigate the next few years. Liberty will continue to adapt its offerings and meet investor expectations in an increasingly competitive investment marketplace.”

Liberty’s latest offerings, Structured Global Performer V5 and Structured Global Performer ESG V5, opened for investors on October 7 for a limited time only, closing on December 6.

This article was sponsored by Standard Bank.

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