The Fund fell by 4.79% during September, behind its performance comparator of cash (as measured by the Bank of England’s Sterling Overnight Index Average (“SONIA”)) + 5% which rose 0.55%. It was ahead of the FTSE 100 index, however, which was down 5.36% over the month on a capital only basis.
(Source of all figures: FE Analytics)

After a brief rally following the death of the Queen in the first part of the month, the UK markets fell during the second half, as attention turned to the mini budget of the new government. Despite already being pessimistic beforehand, most economists were still taken by surprise with the extent of the measures proposed. This led to a steep fall during the final week as investors were concerned both by the level of additional borrowing that would be needed to fund the government’s intended tax cuts, and also the effect the measures would have on inflation, which was in direct opposition to the Bank of England’s efforts to bring it under control.

Two strategies had observation points in September. Both were over the counter, step down contracts linked to the FTSE CSDI index. It was the first observation point for both, with the index needing to be at or above its strike level for the strategy to mature. With the first the index had risen by 2.24%, causing it to mature with a 7.2% gain. For the second the index was up 4.11%, triggering the maturity with a 7.8% gain.

In both cases the proceeds, plus some of the recent inflows, were rolled over into new over the counter strategies. Both have an 8 year maximum term, are linked to the FTSE CSDI index, and have the required index level fall over the term from an initial 100% of the strike level in year one to 90% in year 8. The first was at a coupon of 9.41% whilst the second benefitted slightly from the increase in volatility towards the end of the month with a coupon of 9.72%, giving an uplift in both cases over the strategies they were replacing.

Further details of all the strategies within the fund can be found on the Fund’s website: fund.lowes.co.uk.

The value of this investment can fall as well as rise and investors may get back less than they originally invested.

The Fund is suitable for investors who are seeking capital growth over a medium to long term horizon but who are willing to tolerate medium to high risks due to the potentially volatile nature of the investments.

This article is for information purposes only and should not be construed as advice. We strongly suggest you seek independent financial advice prior to taking any course of action.

The Lowes UK Defined Strategy Fund is a sub-fund of the Skyline Umbrella Fund (ICAV) and is regulated by the Central Bank of Ireland. The KIID, Prospectus, and Supplement can be accessed by visiting UKDSF.com/literature and are only available in English.

Lowes Investment Management Ltd, Fernwood House, Clayton Road, Newcastle upon Tyne, NE2 1TL. Authorised and regulated by the Financial Conduct Authority.