Carrick Wealth, the Cape Town-based wealth and capital management firm that specialises in international ownership structures and investments, celebrated three years in the business this week.
From a start-up comprising a handful of people in a small office in Cape Town, the financial advisory company is now employing more than 150 staff in offices in South Africa, Mauritius, Zimbabwe, and Botswana, with Malawi and Kenya to be operational by the end of 2017. The company, which has assets of US$250m under management offshore and ZAR150m (US$11.3m) onshore, is also looking to establish itself in Ghana, Tanzania, Mozambique, and the Ivory Coast.
Anthony Palmer (pictured), director, investments & products, at Carrick Wealth, spoke to SRP about the importance of structured products for the firm, the competitive landscape in Africa, the product types and payoffs most preferred by the African investor, and the impact of regulation.
Structured notes are a core holding and play a critical role in meeting clients risk and return expectations, according to Palmer. "We use third-party managed and passive funds and we also use low-risk structured notes as a core holding of our portfolios," said Palmer. "Maturities are normally six years. We are comfortable with this as our focus is long-term retirement planning. These notes provide increased certainty of income with various levels of capital protection."
The issuers for Carrick's structured investments are highly rated international banks. "The notes are annual income notes linked to a basket of three to four developed market equity indices," said Palmer. "Capital barriers are usually 60% so any one index needs to drop by more than 40% from its starting level for a client to lose capital. Coupon triggers are annual and usually between 60% to 70% and are often memory coupons, whereby if you miss a coupon you can catch it up the next year.
"Our clients generally hold structured notes within international retirement plans and international trusts via portfolio bonds or investment platforms," said Palmer.
SRP's South African database lists more than 190 structured products with a strike date in 2017 to date, including offers from Absa, Glacier, Investec, Momentum, and Standard Bank. Most of these are linked either to a single index, often the FTSE JSE Africa Top 40, or a basket of indices, and the vast majority are fully capital protected. Palmer agreed that the African investor prefers equities. "In general investors like equities, but property is a popular asset class, too," he said. "The risk appetite of investors in Africa differs from client to client but capital protection definitely features."
Carrick is supervised by the Financial Services Board (FSB) in South Africa and by the local regulators in all jurisdictions where the company operates. "Carrick adheres strictly to regulation in all jurisdictions," said Palmer. "We believe regulation and regulatory change will have a massive impact going forward and we welcome and embrace it. We constantly keep our clients informed of changing regulation and any impact it may have on their financial planning."
According to Palmer, structured investment products are integral to the firm's strategy of customising financial plans specifically to suit clients' needs. "Structured notes introduce downside protection and stability into a portfolio, especially in light of the volatile markets we are currently experiencing and reasonably expect to continue seeing," said Palmer. "The notes are positioned to work in tandem with an actively managed portfolio as well as passive exchange-traded funds (ETFs). We believe a blend of the three should create the support and stability required for a medium- to long-term investment for our clients."
Anthony Palmer is speaking at the SRP Africa Structured Products & Alternative Investments Conference, which will take place on November 1-3, 2017, in The Maslow, Johannesburg. Click the link to register.
Related stories:
Glacier tax-efficient solution allows diversity in more than one way
Stanbic IBTC Bank to sell structured products through private banking
Smart beta indices offer comfort in Mauritius, MCB Capital Markets
Smart beta underlyings are gaining traction in South Africa, Barclays
Q&A with Investec's head of structured products sales South Africa