In September 2022, a client approached us with a specific goal in mind: to diversify her income channels. With a substantial amount of AED in her bank account, she was keen on exploring investment opportunities that would provide her with steady income.
The Challenge:
Typically, fixed income assets, like bonds, are known for generating consistent income but not necessarily for capital appreciation. Our challenge was to not only secure a reliable income source for the client but also to identify an opportunity for potential growth in the asset’s value.
The Strategy:
Given the global currency landscape at the time, we noticed an opportunity with the British pound (GBP). The GBP was undervalued, making it an attractive currency to invest in. We decided to acquire a fixed income bond for the client in GBP denomination, leveraging the currency’s devaluation to our advantage.
To execute this strategy, we turned to our trusted treasury house for the currency conversion. Traditional banks typically have higher margins and fees, and by using our treasury house, we managed to achieve a competitive exchange rate. This decision resulted in a direct saving of 0.35% on the transaction, translating to a substantial 3,5000 AED saved on the 1,000,000 AED transaction. This move ensured that we got the best possible exchange rate and showcased the tangible financial benefits of partnering with our treasury house over traditional banking options.
The Outcome:
Fast forward to the present, and the strategy has proven to be a masterstroke. While the fixed income bond continued to provide the client with regular income, the asset’s value appreciated by a whopping 18% due solely to currency appreciation. This means that the client benefits from the bond’s income generation, and she also saw a significant growth in the asset’s value – a rarity for fixed income investments.
Conclusion:
By taking advantage of the currency devaluation and partnering with our treasury house for the currency conversion, we transformed a traditionally income-generating asset into both a productive and growth asset. This strategic move not only met but exceeded the client’s expectations, leading to immense satisfaction. It’s a testament to the importance of understanding global financial landscapes, making informed, strategic decisions, and leveraging trusted partnerships to maximize returns.
