.jpg)
Structured Investments allow sophisticated investors to obtain appropriate risk and return profile not easily achievable through plain vanilla fixed income or equity investments.
Structured Fixed Income Investment typically offers investors higher yield in exchange for some measured risks linked with interest rate (e.g. Libor Range Accrual Note, or CMS Spread Accrual Note), foreign exchange rates (e.g. Dollar/Yen Range Accrual Note), and credit risk (e.g. the infamous CDOs).
Structured Equity Investment typically involves investors shorting certain options in exchange for some premium upfront. Equity Linked Notes which offer investors high coupon return unless the equity price drops substantially below certain threshold have been popular in a bull or range bound markets. Leveraged exposure investments, such as the infamous Accumulator, has lost billions for high network investors and given structured products a bad name.
After excessive risk taking in 2004-2007 periods, investors have been forced take large write-downs which have resulted in the closure of well known firms such as Bear Stearns and Lehman Brothers in 2008. In 2009, many investors and banks were busy cleaning up and restructuring existing portfolios. Some limited new deal activities will likely come back to the market in 2010 and beyond.
Bond Trust’s approach to structured investments rests on its in-depth quantitative research. Bond Trust has developed sophisticated models to evaluate the risk and return profile of potential investments, and has correctly advised customers to avoid the overheated CDO sector in 2006 and 2007 run-up.
