Stropro debuts structured fund, expands issuer pool

The Australian structured product platform continues to expand its products offering and platform capabilities.

"The Stropro Global Income Fund would be the first structured fund that we know of in Australia," said Ben Streater (pictured), chief investment officer at Stropro.

"The product offers diversification away from private debt or private credit, which have been popular alternative investments for Australians to generate income over the last decade through this low interest rate environment, especially for accredited investors."

The fund aims to outperform equities on the downside and investment grade bonds on the upside. The deep downside protection featured by the FCNs – typically between 50% to 60% - reduces the volatility of the fund "quite substantially" versus direct equities.

"There are not many distributors in Australia – only two or three private banks," said Streater. "Stropro is quite unique to have the ability to access such a large issuer panel and to issue funds."

Stropro has onboarded Morgan Stanley and launched its first structured fund.

Managed by Stropro Funds Management, the Stropro Global Income Fund aims to provide accredited investors and independent financial advisors a ‘defensive, globally-diversified fund of defined-income return investments’.

According to the firm, 60% to 80% of the fund assets will invest in fixed coupon notes (FCNs) linked to blue chip stocks with exposure to eight investment banks in Stropro's current pool with the remaining to be invested in specialist fixed income managers.

Following a soft launch for 10 clients in April, the fund has generated AU$3m seed capital, which is set to be deployed for five to six FCNs in the coming weeks – the fund is targeting AU$15m over the next three months.

The new offering is seeking to deliver the Reserve Bank of Australia (RBA) cash rate plus four percent, which amounts to approximately eight percent pa.

"The return will be paid monthly. The FCNs will be paying quarterly, but the payment dates will start overlapping monthly," said Streater, noting that liquidity is an important theme of 2023.

Boutique Capital will act as trustee, and redemptions will be available after six months.

As a direct participant of Clearstream, an Australian custodian, Stropro can trade directly with accredited investors and financial advisors without the need of private banks.

The two client groups account for around 70% and 30% of the structured products flow at the firm, respectively, following the launch of a financial advisor hub in Q4 22.

“Two common questions we are asked by clients about the fund. The first is around the number of products and the diversification within the fund," said Anto Joseph, CEO of Stropro.

"The other one is around the correlation to equity markets or bond markets, because what we're trying to do is to create lower correlation to equities and