This is an example of one of our
supplementary Product Research
documents which should be read in
conjunction with the Brochure for a
Plan. All products, including those
within the Meteor third-party
distribution network, will have a
supplementary Product Research
document. These are intended for
financial advisers only.
For ease of identification, all our
Product Research documents are
themed to be consistent with the
relevant Brochure.
The headline product details are
indicated on the front of the
document as a reminder to the
kind of shape that was tested.
This first page has a familiar layout to the Key
Investor Information Documents commonly
provided for funds. The difference here is that we
evaluate product performance in Expected market
conditions as well as Adverse market conditions.
The bullet points under the Expected
market conditions are generic
expectations based upon the resultant
Risk Rating assigned to the product. They
are not guarantees but they are what we
expect of the product, should the
product perform under our assumptions
of the future.
Just like Key Investor Information
Documents, we provide a Risk Rating
based on the volatility of returns.
Whereas funds are able to calculate a
historical volatility, we have to estimate a
volatility from simulations of product
performance. When we tested a sample
of funds in our model, we were able to
approximate the official Synthetic Risk
and Return rating of the funds
themselves, consistently.
The bullet points under the adverse
market conditions will change depending
on the results of our stress testing. For
example;
• Is the product expected to provide
adequate protection against a loss?
• Is the product expected to perform
better than the market proxy?
• Is the product expected to have more
uncertainty in the returns than the
market proxy?
We pursued actuarial approval to
ensure that a professional
independent third party was of
the opinion that we used a
reasonable approach to risk rating
structured products.
In addition to the risk rating, we
also show the frequency
distribution of returns from our
10,000 simulations of the product.
The first section shows the proportionate
distribution of returns of all the simulations in 5%pa
compound annual growth rate intervals with a
description of the most frequently simulated unique
result and what the compound annual growth rate
for that result would be. Finally, a description of the
frequency in which a capital loss was simulated is
shown too.
This secondary section is as above but
is only based on the data for the
filtered dataset in which the market
proxy was simulated to have
produced a loss. This is the frequency
distribution of simulated returns in
our stress testing.
As well as the forward looking
indications provided, we also offer
historical simulation results based
on the whole data range
obtainable for the underlying
assets. A frequency distribution is
shown for all the possible maturity
scenarios the product offers based
on the assumption that the
product was available on every
trading day since data was
available for the underlying assets.
This final section is our default risk analysis.
We use an independent calculation agent;
Bloomberg, to obtain a purely quantitative
default risk probability and credit rating.
Occasionally, the actual issuing entity’s
information is not available. In these
situations, we refer to the calculation on the
parent company instead.