RBS and NAB offer exposure to illiquid investors

RBS Group has partnered with NAB to develop a capital guaranteed product aimed at providing cash-locked investors with an opportunity to re-establish market exposure.

Re-Strike offers investors exposure to a reference index in the form of two strategies. The SPI 200 Index is a series of rolling futures contracts over the S&P/ASX 200 with an investment term of seven years; the Aquantum EL1 Pegasus Strategy is a commodity market neutral strategy linked to the performance of an advanced quantitative futures trading index with an investment term of 6.5 years, the companies said in a joint statement.

“Post the global financial crisis, many investors have been cash-locked in non-performing investments unable to benefit from the rebounding Australian market,” said RBS' head of public distribution, Asia, Aaron Stambulich.

“Re-Strike allows investors to re-set their capital position in a non-performing product so they can re-enter the market without additional costs.”

Re-Strike has the potential for accelerated growth and minimised exposure to volatility by lowering the participation rate when the volatility of the reference index increases, he said. Re-Strike was structured by RBS and facilitated by a NAB investment loan.

NAB Wholesale Banking’s head of product development and execution, Connie Sokaris, said investors typically applied for loan approval and the loan was subsequently made available at 100 per cent, with 80 per cent allocated to units in the investment. The remaining 20 per cent is payable to facilitate redemption of the investor’s cash-locked investment.

“In some cases, the best a cash-locked investor can hope for is to get their money back at the end of the product term, while incurring considerable interest payments on their loan,” Sokaris said.

“Re-Strike offers these investors the opportunity to re-enter the market with the help of an investment loan and to settle exit costs from existing non-performing products.”