Investec launches boutique subsidiary to target wealth managers

Investec unveils its first boutique products aimed at the wealth and discretionary management market

Investec has launched a boutique subsidiary to increase its structured products' penetration among the UK's high-end adviser community. The first two plans to emerge from the business are similar to Investec's retail offerings but are tailored to a slightly more sophisticated and wealthy clientele.

"When we established the business in May 2008 the primary focus was always to build a retail mass market channel... and when the timing was right to build a subsidiary to complement the retail business to service wealth and discretionary manager and high-end independent financial advisers," explains Gary Dale, head of intermediary sales for structured products at Investec in London.

"We didn't want to lose all the good bits of our retail plans, such as transparency and uncluttered products. We have taken six to nine months to build this, we are adamant we want to get it right," he says.

One of the new products on offer is Portable Beta, a five-year investment that offers differing returns depending on the choice of counterparty. If Investec is selected as counterparty, investors will receive 110% of any upside of the MSCI Emerging Markets Index. If they select Santander, they will get 100% of the rise in the index.

The downside for the product is linked to the FTSE 100, so if the index falls more than 50% below its starting level capital will be lost at the rate of 1% for every 1% fall in the index.

"This allows intermediaries to discuss emerging market upside with clients without asking them to take on the risk - they understand the FTSE risk," says Dale. "We did a lot of market testing on the Portable Beta plan and the feedback was very positive. People love this concept of emerging market upside without the downside."

The other new offering is the three-year Geared Returns product, which offers two options and two counterparties. The first option gives a 33% return if Investec is the counterparty or a 30% return if Santander is chosen, provided the FTSE 100 is higher than its starting level after three years.

The second option offers an 18% return using Investec as counterparty or a 16.5% return using Santander. The returns are dependent on the FTSE 100 being higher than 50% of its starting level at maturity. If the FTSE falls below 50% of its starting level capital will be lost at the rate of 1:1.

"This says provided that the final index is above 50% you will get 18%, which is a fantastic natural hedge. It's still a retail product but wealth managers can use it strategically," says Dale.

"We are not changing the model so much so as to confuse investors. We are tweaking the returns and risk, using European options, removing commission and making the minimum investment higher, which is enough to give it a boutique feel."

The minimum investment for these plans is £25,000, making them more suitable for high-net-worth investors. The plans are fee-based, which means they will comply with the UK Financial Service Authority's Retail Distribution Review when it is introduced in 2013.

The plans are open for investment for four weeks. Rather than issuing another tranche of the same or similar products, as it would in the retail business, Investec will then look to the market for opportunities and issue products dependent on that, says Dale.

Alongside its boutique operation, Investec is also offering a service for pure discretionary wealth managers to buy notes based on ideas that are sent to them each week by the trading desk.