Gain exposure to Overseas Equities while receiving franking credits
Strategy
Working with his adviser, James decides he wants exposure to overseas equity market in order to grow his wealth.
James currently has $500,000 in his SMSF of which $300,000 is invested in direct Australian shares.
Instreet Masti can provided exposure to US, European, Indian and US listed tech stocks
James chooses to invests $6,550 in order to gain an exposure to $100,000 to US equity market as meausred by the S&P 500 index. This is funded out of the current cash holding of the SMSF.
During the three-year investment term, James will receive two fixed coupons totalling $4,000 (or 4% of the investment exposure at the end of the first and second year) and may receive a final coupon that is linked to the performance of the S&P 500.
Outcomes
James has not had to sell down any of his Australian equities to gain exposure to the S&P500.
James still receives dividends and franking credits associated with his shares.
Assuming an increase of 30% in the reference index during the three year term, the investment would pay a final cash coupon of $22,000.
If a worst-case scenario eventuates and the reference index falls or remains flat, Masti S&P 500 will still pay the two fixed coupons, but would not pay a final coupon. In this scenario, James’s losses would be limited to the fees and interest paid, net of the coupons received (in this example, this would total $11,650 over the 3 year term).
James gains exposure to the medium-term return potential from US equities.
The product ruling from the ATO for Masti provides certainty on how the interest and coupons are treated.
Benefits of this strategy
The upfront and ongoing payment amounts are relatively low and they can be funded from the dividends and distributions of the portfolio.
If the equity markets falls or remains flat, his losses are limited to the finance cost paid net any coupons received and the full extent this worst-case outcome is known upfront.
Although the investment is designed for investors with a three-year investment horizon, James has the opportunity to exit the investment at the end of each year without penalty.
Masti helps advisors add value to their clients’ by offering a more strategic approach to wealth accumulation while controlling risks and maintaining current share holdings.
Important Information
Purpose of Document: The purpose of this Document is to provide indicative commercial terms only. The Documents commercial results are based on assumptions that may not be realistic. They are indicative only. Markets and market assumptions can change from the time and the commencement date of the Instreet Masti DPA product. Due care and attention have been used in the preparation of this document. However, actual results may vary and any variation may be materially positive or negative.
Document: This Document has been prepared by Instreet Investment Australia Limited ABN 24 622 827 589 (Instreet), a corporate authorised representative of AFSL 434776, and is current as at 12 August 2021.
Issuer and PDS: The Instreet Masti product is issued by Instreet Structured Investment Pty Ltd ACN 140 407 558 and the issue is arranged by Instreet. Instreet Masti is offered in a product disclosure (PDS) or Information Memorandum (IM). The relevant PDS or IM is available from Level 11, 2 Bulletin Place, Sydney, at the website www.instreet.com.au or by phoning 1300 954 678. In deciding whether to acquire or continue to hold and investment investors must first obtain the PDS and IM and carefully consider its contents.
General advice warning: The information contained in this Document is general in nature only. It has been prepared without taking account any potential investors’ personal financial situation, objectives or needs and the appropriateness of this information needs to be considered in that context. Advisers must form their own views on whether the Instreet Masti is appropriate after considering their clients’ objectives, financial situation and personal needs. We recommend you seek your own legal and taxation advice. The information may be based on assumptions or market conditions and may change without notice. This may impact the accuracy of the information. In no circumstances is the information in this Website to be used by, or presented to, a person for the purposes of making a decision about a financial product or class of products.
However, actual results will vary and any variation may be materially positive or negative.
No responsibility or liability is accepted by Instreet or any third party who has contributed to this document for any of the information contained herein or for any action taken by you or any of your officers, employees, agents or associates.
Past performance: Past performance is not a reliable indicator of future performance.
