Presentation is loading. Please wait.

Presentation is loading. Please wait.

Use of structured products in wealth management April 2008 Tomas Hochmeister EQUITY DERIVATIVES HOUSE OF THE YEAR.

Similar presentations


Presentation on theme: "Use of structured products in wealth management April 2008 Tomas Hochmeister EQUITY DERIVATIVES HOUSE OF THE YEAR."— Presentation transcript:

1 Use of structured products in wealth management April 2008 Tomas Hochmeister EQUITY DERIVATIVES HOUSE OF THE YEAR

2 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 2 Agenda Why Structured Products? Innovation dedicated to investor needs  Alternative to Equity Investments  Alternative to Global Asset Allocation Investment Widen your horizons: Core Satellite  Niche Investments  Alpha Generator

3 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 3 Why Structured Products ? Structured Products have witnessed a huge increase in the past few years. Investors have exhibited enhanced appetite for these investment solutions because of a variety of reasons  Enhancement of risk/return profile  Capital Protection has proved to be a very attractive feature  Possibility to benefit from innovative payoffs  Opportunity to be linked to multiple asset classes  Benefit from the performance of traditional and non-traditional asset classes  No currency risk ( CZK Quanto)  Insurance linked guarantees have also seen a huge demand

4 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 4 Structured Products a fast growing activity A business led by the European market  The most innovative Structured products Retail market volume 2004/2006 Source: Structured retail products EUR Billion +52% 39% +26%

5 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 5 Structured Products: created for a range of clients Investment with total safety Pattern recognition for Target Clients  Lifestyle: Simple and Safe  Risk Tolerance: Low  Current Portfolio: Bond Oriented and Less Diversified  Typical Age group: 50 +  Behavior Traits: Highly concerned about risks Investment with the optimal balance Pattern recognition for Target Clients  Lifestyle: Balanced  Risk Tolerance: Medium and Normal  Current Portfolio: Equities & Bonds (or deposits)  Typical Age group:  Behavior Traits: Willing to go the extra mile with added risk appetite Investment with a maximum leverage Pattern recognition for Target Clients  Lifestyle: Adventurous  Risk Tolerance: Extremely High  Current Portfolio: Equity Options Bias  Typical Age group:  Behavior Traits: Enjoy taking risks for the additional upside potential Conservative Profile Medium Profile Dynamic Profile “Best Size  Fits all” SolutionSolution for “Gambling can be fun”“Play Safe” Solution 100% Capital Guarantee Partial Capital Guarantee No Capital Guarantee

6 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 6 Source: Bloomberg From the distributor standpoint  A true and concrete tool to fight against the behavioural bias of small investors "Odd Lot Theory" Illustration CAC In Index points 45,2 5, In € billions Encouragement for Innovation Case Study on Principal Protected Notes Net inflows in equity funds in France

7 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 7 Enhancement of risk/return profile Case Study on Principal Protected Notes From the investor standpoint  Value added as compared to balanced funds  Improvement of the efficient frontier Expected 10-year gain Source : Edhec Risk and Asset Management Research Centre. July 2005 With Principal Protected SP Without Principal Protected SP 70% 90% 110% 130% 150% 170% 190% -20,0%-10,0%0,0%10,0%20,0%30,0%40,0%50,0% Cvar(95%) 100% in SP 100% in Bond 100% in Equities A B PortfolioAB Equity50%10% Bonds50%10% SP0%80%

8 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 8 Agenda Why Structured Products? Innovation dedicated to investor needs  Alternative to Equity Investments  Alternative to Global Asset Allocation Investment Widen your horizons: Core Satellite  Niche Investments  Alpha Generator

9 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 9 “… If any one owe a debt for a loan, and a storm prostrates the grain,, …… ……. in that year he needs not give his creditor any grain, ……….. pays no rent for this year…” Hammurabi Code 1800 B.C. Hammurabi was the 6 th king of Babylonia. He unified his kingdom creating a unique religion, language and law: The Hammurabi Code One of the first derivatives in history: When did it begin? Much earlier than what you guessed

10 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 10 Case study: Market context at the end of the 90’s 1998 LTCM & Emerging markets crisis:  Equity Market volatility is higher and higher  Risk aversion is high, interest rates are low or not high enough to match liabilities requirements  Investors can hardly afford a principal protection and an exposure on the increase Client needs: Principal protected investments linked to Equities but not relying on bullish markets to generate performance  Answer: Creation of "promises" products / Mountain range

11 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms : the Everest Concept Payoff at maturity:  200% + 100% of the performance of the worst performing stock positive or negative If after 10 years, the worst performing stock of the portfolio displays a flat performance, the investor’s principal is doubled  Equivalent to an annual return of +7.18%  As of October 1, Y swap rate was at 5.00%

12 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 12 Innovation in SP answered a Client need What was possible at this stage: Bet on the increase or the decrease of equity markets What became achievable with this new range of Structured Products: Bet on the non decrease of equity markets with principal protection

13 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 13 Agenda Why Structured Products? Innovation dedicated to investor needs  Alternative to Equity Investments  Alternative to Global Asset Allocation Investment Widen your horizons: Core Satellite  Niche Investments  Alpha Generator

14 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 14 An alternative to equity investments Structured products enable to manage what asset managers dream of achieving:  1. To get the BEST ENTRY point Example: Strike min mechanism  2. …and the BEST EXIT point Example: Launch of emerald concept on 2002, first structured product to offer a lock in mechanism and a high level of participation rate Call on Max: Emerald innovation at a glance  A 6-Year Fund  Linked to a basket of 12 international stocks  100 % capital guarantee  The maximum performance of the basket Every 6 months, the value of the basket is observed. At maturity, the redemption value of the product is based on the best valuation of the basket reached on any of the 12 observation dates  Secure the gain At each observation date, the price of the best performing stock since inception is locked-in, its performance is secured until maturity

15 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 15 Agenda Why Structured Products? Innovation dedicated to investor needs  Alternative to Equity Investments  Alternative to Global Asset Allocation Investment Widen your horizons: Core Satellite  Niche Investments  Alpha Generator

16 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 16 Getting the BEST PERFORMING ALLOCATION Efficient Allocator  3 underlying profiles,  At maturity investor is exposed to the best performing profile, and the principal is protected Payoff:  100% of Initial Principal + 100% of the BEST PROFILE’s Performance – The performance is calculated as the average of the performances recorded every six-months since inception, negative performances being deemed nil

17 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 17 Agenda Why Structured Products? Innovation dedicated to investor needs  Alternative to Equity Investments  Alternative to Global Asset Allocation Investment Widen your horizons: Core Satellite  Niche Investments  Alpha Generator

18 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 18 The Asset Management Industry is changing rapidly The asset management sphere has evolved towards a core satellite structure with a strong growth of the ETF and Hedge Fund industries Source: SG Marketing Global Mutual Fund Industry $ 10,000 bn ETF Industry $500 bn ETF Industry $500 bn Hedge Fund Industry $1,800 bn Hedge Fund Industry $1,800 bn +30% annualized growth since % annualized growth since 2000

19 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 19 ETFs and Structured Products indexation still focus on mainstream indices Traditional indices have well-known limitations  No niche markets in terms of regions  No niche sectors Underlyings: Demand for Alternative & Innovative Indexation Source: SG Marketing

20 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 20 Demand for alternative way to generate performance Play global long term growth themes which are not represented in main stream indices Example: SGI Thematic indices: SG in collaboration with Dow Jones Indexes and asset management specialists such as SAM Group (Sustainable Asset Management) has created the following indices: Exotic Equity betas: new types of underlying for SP

21 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 21 Core: β-research indices overview Source: SG Marketing

22 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 22 SGI Global Environment What is the environment sector?  Investing in environment means investing in companies involved in clean water, alternative energy and waste management. Energy and clean water savings through recycling as well as the production of heat and power in incinerators provide attractive approaches to mitigate energy and water challenges. Vice versa, rising energy prices and water scarcity will drive demand for recycled material and thus provide further impetus to the development of this sector. Index Description  SGI Global Environment aims to reflect the environmental sector. The global index comprises 30 stocks of companies which have their biggest share of revenues in either or several of the following investment clusters: clean water, alternative energy and waste management.  Index components are selected and weighted according to their free float market capitalisation and market liquidity. SGI Global Environment

23 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 23 Satellite: generating α α-research range: designed to outperform a reference index  Systematic or discretionary strategies (hedge fund like) that aim at creating an alpha over a specified benchmark index  Indexation to funds of hedge funds

24 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 24 Satellite: Access to the universe of funds of hedge funds Total Return Strategies:  Alternative investments have traditionally been the province of professional investors  This asset class has enjoyed exceptionally strong returns since 1990 with remarkable consistency Indexation to funds of hedge funds  Lower market directionality of this asset class, plus its capacity to capture diverse trends across all asset classes, and to benefit from arbitrage opportunities

25 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 25 Conclusion Equity linked Structured Products are not trendy investments but long lasting financial tools Their ability to provide added value encourages new developments & innovation Their flexibility allows to address almost all client needs

26 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 26 And what is Adequity? First structured products brand fully dedicated to European wealth managers since 2001 Offering a complete range of investment solutions and related services dedicated to wealth managers Every month, at least one product launch embedding the latest techniques of structured management Benefits from the renowned expertise of GEDS in terms of market opportunities and investment solutions

27 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 27 Thank you for your attention!

28 This material is provided for information purposes only There is no assurance that a transaction will be entered into on any indicative terms 28 Important Information The contents of this document are given for purely indicative purposes and have no contractual value. Prior to any investment in the product, you should make your own appraisal of the risks from a legal, tax and accounting perspective, without relying exclusively on the information with which you were provided, by consulting, if you deem it necessary, your own advisors in these matters or any other professional advisors. Subject to compliance with legal and regulatory requirements, Société Générale may not be held responsible for the financial or other consequences that may arise from the investment in this product. This product may be subject to restrictions with regard to certain persons or in certain countries under national regulations applicable to said persons or in said countries. It is your responsibility to ensure that you are authorised to invest in this product. This document does not constitute an offer for sale of securities in the United States. The securities can be neither offered nor transferred in the United States of America without being registered or being exempted from registration under the US Securities Act 1933, as amended. The documents relating to this product will provide for methods of adjustment or substitution in order to take into account the consequences on this product of extraordinary events which may affect one or several of the underlying instruments on which it is based or, as the case may be, the early termination of this product. Moreover the investor should be aware that the capital protection feature requires for the Issuer, the Guarantor and/or their affiliates, to enter into hedging transactions which have a cost and which may affect the market price, liquidity or value of the Notes, especially when comparing them to the market price, liquidity and value of the underlyings of the Note. The Issuer and the Guarantor assume no responsibility whatsoever for such consequences and their impact on the investment WHEN SIMULATED PERFORMANCE OR PAST PERFORMANCE ARE DISPLAYED, THE FIGURES RELATING THERETO REFER TO PAST PERIODS AND ARE NOT A RELIABLE INDICATOR OF FUTURE RESULTS. When future performance is displayed, the figures relating to future performance are a forecast which is not a reliable indicator of future results. Furthermore, where past performance or simulated past performance rely on figures denominated in a currency other than that of your country of residence, the return may increase or decrease as a result of currency fluctuations. Finally, when simulated performance or performance (whether past or future) are displayed, the potential return may also be reduced by the effect of commissions, fees or other charges. For the products benefiting from a guarantee of Société Générale or of any other entity of Société Générale group (hereinafter referred to as the «Guarantor»), the due and punctual payment by the principal debtor of the obligation of any sums due in respect of these products is guaranteed by the Guarantor according to the terms set forth in the deed of guarantee. In this case, the investor bears in the end a credit risk on the Guarantor. The attention of investors is drawn to the fact that, by the maturity date, the price of certain products can be subject to volatility due to the evolution of market parameters and more precisely the price of the underlying and the interest rates. For certain products, except when Société Générale undertakes to assure a secondary market, there is no liquid market on which these products can be easily traded, and this may have a material adverse effect on the price at which these products might be sold. The information presented in this document is based on market data at a given moment and may change from time to time. Back testing permits the calculation of returns that the product would have had if it had been launched in the past, presented according to the maturity date. It allows an understanding of how the product would have performed at different market stages over previous years. This document is confidential and may not be communicated to a third party (with the exception of your external advisors on the condition that they themselves respect the confidentiality) without prior written consent from Société Générale. The accuracy, completeness or relevance of the information provided is not guaranteed although it has been drawn from sources believed to be reliable.


Download ppt "Use of structured products in wealth management April 2008 Tomas Hochmeister EQUITY DERIVATIVES HOUSE OF THE YEAR."

Similar presentations


Ads by Google