Fixed Coupon Notes (or Strategic Yielding Notes) are equity linked investments that have been used by institutional and Ultra High Net Worth (UHNW) investors for decades, for both income, and as a strategic way to buy stocks at a discount to their current prices.
We recently wrote an article about Fixed Coupon Notes and how they work, and in this follow on article, we will show you how to invest like an institutional investor and use Fixed Coupon Notes in both an overbought, and oversold markets. And we will share two practical examples of Fixed Coupon Notes that were issued by Anadara within the last 12 months and how they are delivering enhanced returns.
Restricted Access
Not all investors have access to these products – Fixed Coupon Notes have generally only been available to investors that have large balance sheets and are able to become a private banking client of banks such as Morgan Stanley, UBS, LGT, Julius Baer and Lombard Odier, who generally require investors to deposit at least $5 million before they’ll even consider you as a client.
Anadara issues Fixed Coupon Notes and other equity linked products to wholesale and accredited investors, allowing them to invest like a private banking clients and have access to the same strategic advantages the ultra wealthy have had access to for decades.
Fixed Coupon Notes are very popular in Europe and Asia, and Issuers like Anadara are working hard to build awareness of these types of products in Australia. Anadara issues Fixed Coupon Notes linked to all markets, but most commonly Australian and US equity markets. When we structure a Fixed Coupon Note, we only choose large cap stocks, like those in the ASX50 in Australia or the S&P500 in the USA.
Oversold Market
When equity markets are oversold, Fixed Coupon Notes can be used strategically to lock in a higher than usual level of fixed income, this is because volatility drives the level of income that can be generated for a Fixed Coupon Note, higher levels of volatility equate to higher levels of fixed income.
Fixed Coupon Notes in an oversold market may suit investors that traditionally invest in private credit markets or corporate bonds that are seeking a higher level of income.
The following case studies focus on two Fixed Coupon Notes that Anadara has issued in the last 12 months, one that was issued at the top of the market, and one that was issued after a sharp sell off earlier this year.
Anadara ASX Mining Notes: 15% Fixed Coupon
This Fixed Coupon Note was issued in August 2024, when the ASX200 was testing its then all-time high of 8,000. We created this Note for investors that expressed an interest in investing in the Australian mining sector, but had a view that the market would fall in the following 12 months. The key terms of this Note were:
- Underlying Stocks: BHP, FMG, RIO, WDS
- Fixed Coupon: 15% per annum paid monthly
- Strike Price: 90% of each stocks initial price
- Matured: May 2025
Had investors invested their capital in equal weighting across these 4 stocks, the total return from the date we issued the Fixed Coupon Note until today, would be approximately -3%. But investors in the Anadara ASX Mining Notes instead experienced a return of approximately 17% – a performance differential of approximately 20% after being delivered shares in Woodside Energy Group which has since rallied from the price it was delivered at.
One of the add-on strategies used by investors that are delivered stock from a Fixed Coupon Note is to sell out of the money calls to generate additional income after the Note has matured.
When investing in a Fixed Coupon Note at the top of the market, its important that investors are happy to end up holding one of the underlying stocks. The Fixed Coupon Note is used to gain a strategic entry point into a stock that you’d like to hold anyway, and receive income while waiting for the pull back.
Anadara US Tech Notes: 25% Fixed Coupon
This Fixed Coupon Note was issued in April 2025 after the sharp pull back seen across global markets amid uncertainty around America’s proposed tariffs on the rest of the world. When structuring this particular Fixed Coupon Note, our objective was to find the highest coupon possible. The key terms of this Note were:
- Underlying Stocks: META, MSFT, NVDA, TSLA
- Fixed Coupon: 25% per annum paid monthly
- Strike Price: 90% of each stocks initial price
- Early Maturity Possibility: November 2025
This Note was structured with an early maturity feature built in – if all 4 underlying stocks were trading higher after 6 months, the Note will mature and investors will receive their capital back and will have received coupons equal to 12.5% in 6 months.
When investing in a Fixed Coupon Note after a significant pullback in the market, the objective is to lock in a higher guaranteed level of income at the possible expense of equity upside.
Customisation
Fixed Coupon Notes can be customised in many ways, and Anadara can create a highly customised Fixed Coupon Note for investors and advisors that wish to invest $200,000 or more.
Investors can choose which stocks are include, the investment term, coupon payment frequency, and whether or not there is a possibility of early maturity. Please get in touch if you’re an Adviser and would like us to price up a customised Fixed Coupon Note linked to the stocks you’d like to buy at a lower price than today in your clients portfolios.
If you’d like to chat about structuring an investment linked to almost any tradable security from any of the major global exchanges, please get in touch with us to help you create a customised product for you.
As with any financial product, understanding the structure and potential payoff scenarios is key to making an informed decision. We highly recommend that investors speak to their professional adviser before choosing to invest in any of our products.
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