Ellume, partner or not?, page-48

Bespoke Batteries

In the upper echelons of wealth, bespoke products abound, and that includes tailored investments.

A product Citigroup Inc.’s private bank may offer clients in 2019 is tied to the electric vehicle market. The firm’s analysts expect the majority of vehicles to be battery powered by 2030, and that the $22 billion industry will swell to $100 billion by 2025. While the consensus view is that the lithium-ion battery industry has low margins, Citigroup believes “very efficient manufacturers will generate higher profit margins over time,” said David Bailin, the unit’s chief investment officer.

Bailin envisions a security that would track the performance of seven stocks exposed to battery manufacturers and the mining of raw material used in their production. If projected price targets are reached, the portfolio would have a 36 percent average return over the first 12 months, Bailin said.

Buyers will get their initial investment back at maturity, while receiving 70 percent of any performance gains. The fee on a five-year note would be 1.75 percent.

“Clients can choose when to get in but won’t be taking a significant capital risk if the note-writer pays it off at maturity,” Bailin said.