Client: Private Wealth Manager, Based in the Middle East
Standard investment grade products generate insufficient returns for our client. In order to achieve a better yield on their portfolios they want to be exposed to the US Equity market but are concerned about event risk from recession, adverse volatility, global uncertainty and inflation which may lead to severe capital losses.
Solution:
- Azzilon together with the client selects the US Tech Sector as the investment universe to be exposed to, one of the world’s largest ETFs linked to the Nasdaq 100. Azzilon builds a systematic model portfolio based on investment choice with a Volatility Target (VT) and transfers it to independent, regulated index providers.
- The index provider validates our proposed strategy & trading rules and accepts the mandate to calculate it on an ongoing basis. They then publish its value live on Bloomberg and similar channels.
- An A+ rated bank licenses the index from the Index provider. They receive the rebalancing instructions and issue a capital guaranteed note, powered by Azzilon, linked to the SmartB VT18 index.
Summary:
| PRODUCT NAME | SMARTB VT18 | NASDAQ 100 | 5-YEAR T NOTE |
| AVERAGE YEARLY RETURNS | 16.48% | 17% | 3% |
| CAPITAL PROTECTION | 85% | 0% | 100% |
| CREDIT RATING | BNP A+ (S&P) | None | US Gov. AA+ (S&P) |
| PARTICIPATION RATIO | 90% | 100% | 100% |
The client achieves his twin investment goals; capital protection with the ability to participate in equity market appreciation. The finalised product is a hybrid which lowers volatility across the curve whilst combining the benefits of a regular bank note with exposure to the stock market.
