News
Japanese equities and Sterling – Mitigating currency risk
27 July 2010
Would you be interested in gaining exposure to Japanese equities, but want to reduce inherent Sterling / Yen currency Exposure? Would you consider using a structured product to optimise your Japanese equity exposure?
The standard method of mitigating currency risk within a structured product is to buy the product in "quanto" format. This removes all currency risk between the underlying asset and the currency of the product. Currently it is very expensive for product providers (ie, the banks) to hedge any "quanto risk" between Japanese equities and Sterling, so such structured products do not price attractively at the moment.
We believe that there is an alternative to the quanto method that will deliver better product terms whilst still mitigating currency risk.
Please follow the link below and click "yes" or "no" depending on whether or not this might be of interest to you. It will take a few seconds. Even if the answer is "no" we would still like to know. If the answer is "yes", we will be in touch.
Link to Voting page
Rates Structures update
23 July 2010
Another idea has been indicatively priced is that of a flattener. This note pays an annual coupon that is dependent on the relative performance of two underlying swap rates. Please see additional factsheet below.
New launches with HSBCʼs EIS Programme
21 July 2010
We are delighted to announce the launch of the latests HSBC FTSE Defensive Auto-Calls. This is the first issue to utilise HSBC's new Excluded Index Security (EIS) programme. An EIS is the latest and most widely used structured product wrapper for UK private placement securities. Designed to create Capital Gains (under current rules), the notes are eligible for Direct Investment, ISAs, SIPPs, SSASs and most types of Trust.
Product Detail Pages:
HSBC FTSE Defensive Autocall Notes 5 (8.5% / -40%)
HSBC FTSE Defensive Autocall Notes 4 (9.3% / -20%)
Basic Rates Structures
6 July 2010One topic that has cropped up time and time again, more so in the last few weeks, has been rates. Despite all the deflationary signals, many of you have expressed a concern about much higher rates / yields at some point in the future. Given most managed funds and APCIMs benchmarked portfolios have significant weighting to fixed income, we have recently been looking at ideas. These ideas range from relatively simply structured notes that provide income, while protecting against a rise in rates, while others are more tactical / hedging related
Two interesting structures that we have suggested both focus on a common view that interest rates are likely to rise in the short to medium term. The digital payoff we priced ensures that the investor receives a much higher fixed rate return when the rates market rises. It is useful for those looking for income as both the regular and high rate coupons are fixed. The fixed to floating rate structure will also take advantage of a rising rates market. What this does in addition is to allow an uncapped upside, so that if rates are ramped up significantly, the payoff then follows this trend.
Please see factsheets below, or contact us for further details.
A further idea we have explored relates to the change in the shape of interest rate curves. Many curves have seen a significant amount of stressing over the last few years, with most steepening across the medium to long term tenors. The below shows the difference between the 1 year and 5 year tenors, and also the 2 year and 10 year tenors. This illustrates just how much the rates have diverged over the past three years. A common belief is that these will begin to converge again over the next few years.
The spread range accrual structure is one such solution that allows the investor to take the view that the difference between two such rates, or the spread, will converge. For every set period of time the spread is within a certain range, below the current spread, a high-rate coupon will accrue.
Alternatively a reverse steepener with leveraged participation is a straight tactical play to a converging rates market.
