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Pricing and markets force Investec to ditch deposit plan

Investec Structured Products has axed one of its structured deposits due for launch on Tuesday.


Head of intermediary sales Gary Dale says the main reason for cutting the Income Deposit Plan for the foreseeable future was that with interest rates so low, it was difficult to price certain structured products and keep the pay-offs competitive relative to other cash-type products in the market.

The firm is set to launch its latest range of products, which can be used within offshore bonds, on Tuesday next week (30 August) but Dale says the firm has decided to pull one deposit product from the launch because it was “simply not possible to keep the product competitive and offer customers good value”.

“Given the current fixed-rate bonds available, customers could go online to a supermarket and buy a fixed-rate bond over, say, five years at 4.6%, almost risk free,” he said, “whereas structured deposits usually have an equity link, so if you’re not getting compensated for the additional risks, why would you buy it?”

For Tuesday’s launch, Dale said Investec Structured Products had tried to keep the pay-offs on its structured deposits as close to 5% per annum as possible, keeping the plans competitive in the current environment.

“We only launch products we ourselves would buy and we like to keep an open range of products, so in the current climate we are cross-subsidising some deposit products to keep that range open for the investor,” Dale said on the decision to remove the Income Deposit Plan.

Investec Structured Products will launch around a dozen products on Tuesday.

“We will temporarily remove products when we don’t believe they work. That’s not to say that when interest rates recover we won’t bring them back,” he said.

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