Intus Currency Hedging Service is intended for Euro investors who would like to benefit on the higher returns currently available for investment products in US Dollar (USD) and UK Pound Sterling (GBP) but not to take any currency risk. If you, as an Euro investor, would like to invest in USD Intus will cover for you the currency risk between the start and maturity date of the chosen investment product. In case the exchange rate of EUR would have fallen towards USD at the maturity date we will pay the currency loss to you. This includes also the coupons or dividends received during the investment term.
Typical investment products which offer good returns in USD and GBP but not in EUR are various Capital Protected Investment Products with 5-7 years investment term. These products are issued by major international banks with high credit ratings. Intus Brokers, our affiliate Group company, has a large selection of Capital Protected Products in their offering. You can find more details here.
The following is an example how the Currency Hedging agreement is priced:
Investment product: Capital Protected Note issued by A3 rated bank
Investment term: 6 years
Expected annual coupons in USD: 12%
Investment amount: 50,000 USD (41,666.67 EUR)
Hedged amount: 50,000 USD and expected coupons 6 x 6,000 USD, total 86,000 USD (71,666.67 EUR)
Exchange rate at inception: 1 EUR = 1,20 USD
Fee options: 0.50% per annum or 2.40% upfront
The following is an example for the expected total return for the Euro investor after 6 years when the EUR/USD exchange rate at the maturity is
5% worse than at inception: Return from investment 86,000 USD / 71,666.67 EUR minus upfront fee 2.40% / 1,720.00 EUR, total net return 69,946.67 EUR (11.31% per annum)
5% better than at inception: Return from investment 86,000 USD / 80,701.75 EUR minus upfront fee 2,40% / 1.720.00 EUR, total net return 78981.75 EUR (14.92 % per annum)