Arab Bank plc's Investment Linked Deposit (ILD) program has been designed with both risk and return firmly in mind. ILD's are fixed term deposits with an average maturity period of 4 years. They offer a full capital guarantee as well as the potential for upside through their links, typically to a basket of international stock indices. In most cases, a minimum guaranteed return at maturity forms part of the structure.
ILDs are especially suitable for investors seeking returns that are higher than the prevailing deposit rates, without risking their capital. They provide investors with the opportunity to participate in the world stock markets, while at the same time giving them the comfort of a capital guarantee on maturity.
Some ILD's did not fully realize their potential upside as market fluctuations in the past meant that the indices that they were linked to did not perform. However, the capital protection feature of the ILD ensured that the investor's capital was preserved and at a time of low inflation and low interest rates, the built-in guaranteed return meant that over the lifetime of the ILD they earned an average interest of between 10 & 12% on maturity.
Returns on these products have however shown a significant increase since last year as markets have again trended upwards. Arab Bank's ILD's have outperformed deposits by an average of 95%. They have earned an average return of 22% in 2006, with the highest performer earning 42.71%. Investors in these products have seen their returns increase to between two and four times the minimum returns guaranteed at maturity.
Comparative performance : ILDs Vs. Deposits
On a sample amount of USD / EUR 100,000 invested for a duration of 4 years :
USD denominated ILDs gave an average return of USD 26,200 as compared to deposit returns of USD 15,500. ILDs provided around 70% higher returns than traditional deposits.
EURO denominated ILDs performed exceptionally well with returns of EUR 42,700 while deposits earned EUR 13,000. In this case, Arab Bank ILDs outperformed deposits by almost 230%.
In addition to the ILDs, Arab Bank has successfully launched a variety of products to suit every investor's financial needs and risk appetite.
The AB Europroperty Fund LP invests in the European property markets and currently pays an annual return of 8% to investors (with a target IRR of over 11%).
Drawing on this success, the Bank launched the 2nd Euro property Fund during the 4th Quarter of 2006. The Fund is investing in northern European property markets across sectors such as logistics, office, retail and industrial premises. It is targeting an annual return of 8% along with the potential for capital appreciation on exit.
Another attractive product was the private placement of units in the US$250 million Saraya Real Estate MENA Fund. The Fund was well received by investors, offering them a unique access to the MENA property markets and was one of the largest placements in the Arab capital markets in 2006, attracting investors from Bahrain, Saudi Arabia, UAE, Oman, Jordan, Palestine & Singapore.
In addition to these specific products, Arab Bank also offers a diverse range of open-ended mutual funds tailored to suit different investor requirements and a multitude of risk profiles. The mutual funds aim at providing long term capital growth or income generation while maintaining a healthy balance between returns and risk potential. The Arab Bank recently infused fresh capital into their mutual funds and improved the investment strategies, reflecting the Bank's commitment to these product lines. Current and future investors can therefore look forward to good performance from a diversified suite of products in 2007.-Ends-
© Press Release 2007
