This Asian entrepreneur, between 50 and 60 years old, has developed his company across Asia and wants to enjoy a steady income from his investments for the coming years. He already has a well diversified portfolio and is looking for a more focused approach for his investment without taking too much risk. He would like to earn close to double digit returns.
Today we face historically low interest rates. Following the strong economic data coming out of the USA, we expect interest rates will rise up to a level of 2.5% to 3% over the next two years before stabilising for the following years. In order to achieve the client?s objectives in such an environment, we would recommend sophisticated structures using the latest developments in financial technology.
In this case, the client should invest in structured fixed income products that offer dynamic yield enhancement strategies.
Our first recommendation follows our interest rate forecast. Thus, the client would invest in floating rate notes of LIBOR + 5% for the first two years to take advantage of the rising interest rates. When the FED funds rates stabilise at around 3% in approximately two years, the structured product will implement a fixed coupon strategy of 7% for the remaining years of the product.