US Wrap: Funds theme strong despite divergence of product types

Basket products give access to diverse markets

There is a variety of products on offer in the latest US issuance, with an equal weighting of accelerated growth and reverse convertible products. There are also a couple of principal-protected products, which have been less common lately, and one straddle product. But despite a range of products being offered, funds and baskets of underlyings remain common themes.

Eksportfinans has issued an accelerated growth product based on four funds, giving mixed exposure to US and emerging markets equites: the iShares MSCI EAFE Index Fund (20%), iShares MSCI Emerging Markets Index Fund (15%), iShares Russell 2000 Index Fund (20%) and the SPDR Trust, Series 1 (45%).

It is a four-year investment, which is an unusually long term for an accelerated growth product issued in the US. Most of these products have one to two-year maturities. Enhanced Growth Securities with Leveraged Upside & Buffered Downside Linked to a Basket of Global Exchange Traded Funds offers 150% participation in any increase in the value of the underlying, with a cap at 45–50%. There is a 20% buffer level on any decrease in the underlying basket, after which capital is not protected and it will be subject to a loss of 1.25:1.

The straddle product in the offering is issued by Barclays. This type of product is less common in the US market and this is the first of its kind to be issued for a few months. The product has a three-year term and is linked to the performance of the S&P 500. Principal is 100% protected at maturity and returns are based on the index falling between 69% and 131% of its strike level. The product has a low riskmap rating of 1.8 and an overall rating of 6.5, scoring well for value and simplicity, but a low rating of 3.5 for returns.

There are a lot of products linked to the S&P 500 in the latest issuance and investing in US equities has become increasingly popular in recent months as conviction about the strength of emerging markets wavers, as we reported in May.

Click here to download a pdf of the products table.

Source: FVC and SEC filings

For access to analysis of the US structured products market: www.structurededge.com