Someone asked me about the
CIMB Max InvestSave Structured Deposit.
This is a long term (15 or 25 years) structured deposit that can give you equity-like returns via exposure to the CIMB Evergreen II Index.
The CIMB Evergreen II Index tracks a wide range of markets across major economic regions and asset classes which adopts a Risk/Return Optimisation strategy by finding the best possible asset class allocations to maximise returns with controlled volatility (Standard Deviation) of around 10%.
It also adopts a Long/Short strategy which proactively trades when markets are bullish or bearish.
If you look at the
CIMB Evergreen II Factsheet, you can see that the historical returns is quite impressive. It managed to return 13.15% even in 2008 (probably via a number of short positions) when the market was down severely. However, the returns for 2009 was more muted at 2.36% (probably still held on to the shorts).
The
Max InvestSave brochure gives some projections of the returns. The investment is 100% protected if held to maturity so if the index does not perform, you will end up with your original invested sum. If you add in the bonus units (given during the promotion now), the annualized returns works out to be about 0.9% p.a.
You should take the higher projections with a pitch of salt because ultimately, your final returns will be dependent on the performance of the CIMB Evergreen II index (which is not guaranteed). Note that the index has a 2% annual management fee and there is also a 5% performance fee.
There is also a performance lock-in feature built in which guarantees the returns based on the highest market price achieved during the product lifespan if held to maturity. While this is a nice feature to have, note that it does not come free as CIMB will have to find some way to guarantee this return.
I’m not too sure how they do it but one way it can be done is to allocation a higher proportion of the assets to fixed income as a higher price is achieved. This might cap reduce future upside of the index.
One fund that has a similar lock-in benefit that was launched in the past was the
AXA Secure Ascent 2020. Unfortunately, it was launched at a very bad time in April 2008 before the market collapsed. The fund was designed to be a 12-year investment giving moderate exposure to equities but because of the market collapse, it now has an allocation of almost 90% to fixed income with the remaining 10% in leveraged equities.
The high fixed income allocation is necessary is in order to give the guaranteed maturity return of 1.00455 based on the lock-in price (current price is about 0.96287). I think investors in the Secure Ascent 2020 fund might see limited upside potential from now till the fund matures in 2020.
Overall, the CIMB Max InvestSave structured deposit allows you to gain exposure to higher risk assets with the potential of higher returns but without the downside risk as long as you hold it to maturity. As the product duration is fairly long, you need to make sure these are funds that you won’t be drawing on in the immediate future.
Of course, you will also need to mind in mind the worst case scenario which is if CIMB goes bust as a structured deposit does not fall under the protection of the Singapore Deposit Insurance Scheme.
