Investment Products – Overview

This week MMPI launched its Escalator Plan Series 32, which is the 45th version of MMPI’s investment products, (some of which have had A and B options). Of the 45 iterations 21 have matured with a great deal of success.

Of the 21 maturities to-date only 2 have lost money and the other 19 have produced returns of up to 23% after 12 months. There is little doubt that depositors and investors are suffering because of ever-lower interest rates but MMPI continues to believe that its investment suite has an important role to play in providing alternative investment opportunities at a reasonable level of capital risk.

MMPI accepts that not all depositors are comfortable moving away from traditional bank deposits even though the returns are pitifully low. On its 1-7 scale of risk measurement MMPI considers bank deposits to score 2 while the MMPI Escalator Plan Series 32 scores 4 out of 7. MMPI believes the potential rewards on offer provide an appropriate balance to the additional risk being undertaken.

The additional risk element is that the capital security is linked to the performance of the Euro Stoxx 50 and the Nikkei 225 – two large baskets of shares. Full 100% capital security is promised by the French bank BNP Paribas provided neither of the 2 indices falls in value by more than 40%. For this level of capital security the MMPI Escalator Plan Series 32 is able to offer potential returns of 3.85% after 6 months – that’s 7.85% per annum.

In simple terms that’s the trade-off; a tiny return for a risk score of 2(7) or a potential 7.85% for a risk score of 4(7). Existing MMPI investors have become comfortable with the compromise and many have enjoyed the growth on offer. The MMPI Escalator Plan Series 32 isn’t a bank deposit, although the investors’ money is held in a Client Asset Account with a regulated custodian – in this case Merrion Stockbrokers – and the investment is conditionally underwritten by BNP Paribas.

If all goes to plan the investment will mature in 6 months with a return of 3.85%. This return is paid gross and is tax exempt for pension investors. The gross return is subject to CGT for personal investors. The attractions of CGT over DIRT are that the absolute tax rate is lower and any gains are allowable against previous losses. MMPI does not provide explicit tax advice and this is our understanding of the treatment of CGT by the Revenue Commissioners.

MMPI’s track record is impressive but, of course, past performance is not necessarily a guide to future performance. Nevertheless, 19 positive maturities out of 21 is very consistent (that’s a 90% success rate). In the Series 32 version if there is no pay-out after 6 months the investment rolls forward to 12 months where 3.85% x2 is payable – and so on until the conditional return is met. The maximum potential return is 38.5% after 5 years. It’s a simple, easy-to-understand idea with no catches