Few months back, we explained the Memory Feature and the gains you sacrifice for adding it to your structured note. In this article we will be reviewing the Memory Feature along with the 100% Coupon Trigger and the reasons it might not fit everyone. After all, just like with many other things in life, when it comes to Structured Products there really is no One Size Fits All!
The memory feature is essentially an extra component which we can add to a Structured Product to add an extra safety net when it comes to coupon payment.
What is the Memory Feature?
To put this simply, if at any observation, a coupon is missed, the memory feature will remember the missed coupon and add it to the next observation. If underlyings are above the coupon trigger on the next observation, all the missed coupons will be paid.
1. All About the 100% Coupon Trigger
Having a note with the three-digit Coupon Trigger, namely 100%, might seem off putting for some investors.
Here are two of the more common reasons listed:
- For the note to pay a return, all the underlyings must be at or above the initial fixing level on the day of the coupon observation
- They might be in for the long haul without any regular income to earn the interest compared to the notes with lower coupon trigger
2. Where’s the catch?
(Yes, on this instance there’s a good kind of catch!)
It is well known – Where there’s demand, the supply usually follows. NEBA has had and is still issuing 100% Coupon Trigger Products with Memory Feature. There are many reasons why an investor might decide to invest in a Structured Product with 100% Coupon Trigger.
Firstly, let’s look at two similar notes with Snowball Memory Feature. Both have similar level of protection and semi-annual observations for the coupon payment.
Investor A who has decided to place his capital in the note with the higher Coupon Trigger stands a chance of earning 13% p.a. in returns while investor B is looking at 7% p.a. In 6 years that’s 78% vs 42%!
|Investor A||Investor B|
|Prefers the extra safety net of the Memory Feature||Prefers the extra safety net of the Memory Feature|
|Less concerned about the frequency of the interest payments and prefers higher returns instead||Looking for regular returns on the investment|
3. Does it pay off?
While nothing can be predicted with full certainty, for those who have the investment appetite for investing in a 100% Memory Coupon Trigger structure, there is a chance for some juicy gains while still benefitting from the investment protection that Structured Products offer.
This week NEBA was pleased to inform our investors of the Autocalls of two notes with 100% Memory Coupon Trigger earning investors up to 60% in profit in just over 2 years!
4. Did the wait pay off? I’d say so!
Looking into the future
The Memory feature can indeed be useful, and an especially attractive feature. To really take advantage of the flexibility of Structured Products, investors should always consider their return expectations and investment appetite.
Will the choice of an investment cater to my needs and what are the safety nets and features that I can benefit from? Am I willing to forgo immediate profits for the bigger gain in the future? How do I pick the right balance between the gains and safety features?
With the extensive knowledge of our NEBA team who monitors and analyses the markets daily, we are confident we can tailor the right fit for your structured investment needs.
Read more on the Snowball Memory Feature here -> https://nebablog.com/2017/07/26/all-about-the-snowball-memory-feature/
And contact us at firstname.lastname@example.org for more investment options and personal tailoring of the Structured Product that meets your criteria and expectations.