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Investments – MMPI Escalator Plan Series

With deposit rates so pitifully low (and heading lower) savers are being forced to re-evaluate their financial options. Simply stated, depositors cannot earn income from deposit interest that is anywhere close to traditional returns. Elsewhere in the Eurozone depositors are now being charged negative interest rates for holding deposits. Just count backwards and think about it – consumers are guaranteed to lose money by leaving their funds on deposit.

MMPI, for its part, has guided depositors away from this nightmare towards other types of protected investments – the MMPI Escalator Series. We have been very careful to explain that these investments are not like simple deposits. We have highlighted that, for the most part, the MMPI Escalator Series carries a risk score of 4 on MMPI’s risk scale, which is 2 notches higher than a simple term bank deposit account. This extra risk provides for a potentially higher return but the return is not always assured. Over the past 6 years the MMPI Escalator Series has produced excellent returns for investors as deposit rates moved ever lower.

To-date in 2016, the MMPI Escalator Series has had 6 maturities. The outcome is a mixed bag but we believe it is, nonetheless, highly informative. 4 of the 6 products produced much higher returns than deposit accounts and paid out much earlier than anticipated – in 3 of the cases the pay-out was after just 6 months. Unfortunately, 2 products produced negative returns (between 5%-10%) and ran to their full 3-year maturity. The lessons are clear. The MMPI Escalator Series does not offer guaranteed returns but it does provide very real alternatives to deposit accounts once the additional risk rating is understood.

Savers are faced with a real dilemma. Deposit accounts produce no income and soon they will drain savings. Consumer reactions to such a counter-intuitive position will prove interesting. Those seeking income will be forced out along the risk curve – while others will act lethargically and watch their savings dilute away.

MMPI’s latest investment product – the MMPI Escalator Plan Series 35 – addresses the dilemma head on. It offers a potential return of 6.60% after 12 months, which is something that is no longer available from deposit accounts unless consumers commit funds for close to 10 years. Series 35 follows a familiar path by tracking the EuroStoxx50 index. The product will pay 6.60% in 12-months’ time if the EuroStoxx50 index finishes higher than 95% of its initial level. In other words the index can fall by 4.99% and the product will still pay 6.60%.

Meanwhile, investors in the MMPI Escalator Plan Series 30 had a return confirmed this week of 3.90% after just 6 months – even though the EuroStoxx50 index finished only 0.89% above the required level. If you are interested in investing in MMPI’s Escalator Plans you are encouraged to read the product brochure where a full list of the terms and conditions – and the relevant warnings are provided. We realise that it is not for everybody but the rationale is very compelling.

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