For investors looking for equity exposure to the European and US markets, the Discovery Capital 200+ offering is a fixed-term five-year product based on a global portfolio investing in the Eurostoxx50 and S&P 500 indices.
Launched by Discovery Invest, the Discovery Capital 200+ product offers some unique features for investors who remain fully invested for the five year period. “These enhancements are aimed at boosting investment returns while offering some capital protection in negative markets” says Craig Sher who is the Head of Product Development at Discovery Invest.
· If the global portfolio return is positive at the end of five years, the Discovery Capital 200+ will provide a minimum return of 100% (double) the original capital investment made. This includes flat performance (if markets move sideways), or even if there is very limited positive performance.
· If the global portfolio return is higher than 100% after the five year period, investors will not only double the capital they invested, but receive all the additional upside return as well.
· There is also conditional downside protection. Should the global portfolio provide a negative return of up to 50% at the end of five years, 100% capital protection is provided for and the investor receives back full capital. So if an investor invested R1 million and the portfolio return is negative 40%, the investor receives back the R1 million original investment, and capital remains intact.
However, should the portfolio fall more than 50%, the investor would be exposed to the full downturn in the portfolio. For example, on a R1 million investment, with five year performance being negative 60%, the investor would receive back R400 000.
Sher indicates that the planned allocation of the portfolio is 70% to the Eurostoxx50 and 30% to the S&P 500 price indices. “Although the global portfolio is based in these offshore markets and invested in foreign indices, the product has been designed so there is no currency risk to the investor. If the Rand weakens or strengthens over the five year period, this does not impact on the final return of the global portfolio.”
The global portfolio returns do not include dividends as these distributions are rather utilised in providing the enhanced payouts and guarantees that the product offers at the end of its five year maturity.
Sher points out that there are no management fees within the global portfolio. “However, standard Discovery Invest administration fees apply, as would financial adviser fees if investors make use of financial planners. Discovery does, however, provide another unique benefit called the Discovery Upfront Investment Integrator, where investors have the opportunity to get back the value of these administration and financial adviser fees.” The product is also designed to be tax efficient so returns are taxed as capital gains within the Discovery Endowment Plan.
Investments are made as a once off lump sum, with a minimum investment of R100 000, and the product offer closes on 10 July.
Sher explains that for all benefits, protection and enhancements to apply, investors must remain fully invested for the five year period. “However we acknowledge that personal circumstances can change, and should an investor need to withdraw funds prematurely, they would receive back the market value of the financial instruments Discovery has used at that particular time.”
“This product is highly suited to equity investors wanting some diversified offshore exposure into developed markets. There is the opportunity of a high minimum return if markets are flat or positive, with full upside potential should markets more than double, as well as the benefits of conditional downside protection should markets become negative” says Sher.
About Discovery Limited
Discovery Limited is a South African-founded financial services organisation that operates in the healthcare, life assurance, short-term insurance, savings and investment products and wellness markets. Founded in 1992 by the current Group Chief Executive Officer Adrian Gore, Discovery was guided by a clear core purpose – to make people healthier and to enhance and protect their lives. Underpinning this core purpose is the belief that through innovation Discovery can be a powerful market disruptor.
The company, with headquarters in Johannesburg, South Africa, has expanded its operations globally and currently serves over seven million clients across South Africa, the United Kingdom, the United States, China and Singapore. Vitality, Discovery’s wellness programme, is the world’s largest scientific, incentive-based wellness solution for individuals and corporates. The global Vitality membership base now exceeds 5.5 million lives in five markets.
Discovery is an authorised financial services provider. It trades on the Johannesburg Securities Exchange under the code “DSY”.
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