Structured Products Highlight: UBS Autocallable Linked to JOY
(Nov 2012)
Today we're highlighting a structured product issued on July 25, 2012 by UBS. This product (CUSIP: 90269T574) is a Trigger Phoenix Autocallable Optimization Security linked to Joy
Global Inc. (JOY). Since this product is issued by UBS, purchasers of the notes were exposed to the possibility that UBS would have been unable to meet the obligations spelled out in the note's offering documents.
This particular note offered investors quarterly coupons (annualized rate of 12.84%) if JOY's stock...
Can Non-Financial Firms Issue Structured Products?
(Nov 2012)
The simple answer is yes. Structured products are for regulatory purposes corporate debt--that's why they are vulnerable to the credit risk of their issuers. In theory, any firm that can issue corporate debt could issue a structured product, and could link that structured product to any underlying asset it choose. In practice, no non-financial firm has done so in the US (to our knowledge), as there hasn't been a compelling reason for them to do so.
But according to Vita Millers at Risk.net, ...
Structured Products Highlight: Buffered SuperTrack Linked to the S&P 500
(Nov 2012)
Today we're highlighting a structured product issued on September 30, 2011 by Barclays. This product (CUSIP: 06738KWL1) is a Buffered SuperTrack Note linked to the Standard & Poor's 500 (S&P 500) index.
This particular note offered investors exposure to the S&P 500 with buffered protection if the index declines over the term of the note. Specifically, if the index level is not more than ten percent below the initial level at maturity, investors receive their entire principal investment. An...
Structured Products Highlight: Reverse Exchangeable Linked to Apple
(Nov 2012)
We here at SLCG have been working on research reports to educate investors concerning recent offerings of structured products. We've talked a lot about structured products on this blog and we wanted to start describing the features of individual products and how we analyze their value.
Today we're highlighting a structured product issued in August 2012 by JP Morgan. This product (CUSIP: 48125V4K3) is a Reverse Exchangeable Note linked to Apple stock (AAPL). Reverse exchangeables -- also known...
Leveraged Exposure to the Mortgage REIT Sector
(Oct 2012)
Michael Aneiro over at Barron's pointed out an interesting recent SEC 424(b)2 filing from ETRACS for their Monthly Pay 2x Leveraged Mortgage REIT ETN (MORL). According to the prospectus, the ETNs will "provide a monthly compounded two times leveraged long exposure to the performance of the [Market Vectors Global Mortgage REITs Index], reduced by the Accrued Fees." This ETN is essentially a leveraged version of Market Vectors Mortgage REIT ETF (MORT) which tracks the same underlying index.
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Exchange Traded Interest Rate Swap Futures
(Oct 2012)
We've talked briefly about interest rate swaps in the past, but I wanted to write about a recent development in the securities industry that relates to these conventionally over-the-counter (OTC) instruments.
Back in the summer of 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act (PDF) was signed into law and as a result many OTC products have began the process of standardization in preparation for exchange trading. The idea is essentially that exchange traded products offer...
Repackaging Securities Means Repackaging Risks: the Case of STRATS 2005-2
(Sep 2012)
On July 12, an exotic structured security that was trading at approximately $25 per share was suddenly redeemed at $14.69 by its issuer, Wells Fargo Advisors. Needless to say, some investors were surprised by the event, which did not appear to be anticipated by the market. Indeed, the securities -- Floating Rate Structured Repackaged Asset-Backed Trust Securities Certificates, Series 2005-2 (abbreviated STRATS 2005-2) -- had embedded risks that resulted from repackaging the same underlying...
401(k) Fees Can Drastically Reduce Nest Egg
(Jun 2012)
A recent report conducted by Demos -- a New York City-based public policy organization -- points out that the high fees charged by 401(k)'s can cut nest eggs by 30% for median-income two-wage family.
Company-sponsored 401(k) plans often include a list of mutual funds in which employees can invest. Although these fees are disclosed on the individual fund prospectuses, the account statements from 401(k)'s generally do not include such fees (only the result of the fund performance net of fees)....
