AHFM Structured Products Fund January 2014 This is a marketing communication and has not been prepared in accordance with legal requirements designed to promote independence of investment research and is not subject to any prohibition of dealing ahead of the dissemination of investment research. The information in this document is derived from sources believed to be reliable but which have not been independently verified. Any prices included within this communication are for indicative purposes only. Atlantic House Fund Management LLP makes no guarantee of its accuracy and completeness and is not responsible for errors of transmission of factual or analytical data, nor is it liable for damages arising out of any person’s reliance upon this information. All charts and graphs are from publicly available sources or proprietary data. The opinions in this document constitute the present judgment of Atlantic House Fund Management LLP, which is subject to change without notice. This document is neither an offer to sell, purchase or subscribe for any investment nor a solicitation of such an offer. This document is intended for the use of institutional and professional customers and is not intended for the use of private customers. This document is not intended for distribution in the United States of America or to US persons. This document is intended to be distributed in its entirety. No consideration has been given to the particular investment objectives, financial
Transcript
AHFM Structured Products FundJanuary 2014
This is a marketing communication and has not been prepared in accordance with legal requirements designed to promote independence of investment research and is not subject to any prohibition of dealing ahead of the dissemination of investment research. The information in this document is derived from sources believed to be reliable but which have not been independently verified. Any prices included within this communication are for indicative purposes only. Atlantic House Fund Management LLP makes no guarantee of its accuracy and completeness and is not responsible for errors of transmission of factual or analytical data, nor is it liable for damages arising out of any person’s reliance upon this information. All charts and graphs are from publicly available sources or proprietary data. The opinions in this document constitute the present judgment of Atlantic House Fund Management LLP, which is subject to change without notice. This document is neither an offer to sell, purchase or subscribe for any investment nor a solicitation of such an offer. This document is intended for the use of institutional and professional customers and is not intended for the use of private customers. This document is not intended for distribution in the United States of America or to US persons. This document is intended to be distributed in its entirety. No consideration has been given to the particular investment objectives, financial situation or particular needs of any recipient. Atlantic House Fund Management LLP registered in England and Wales, Registered Office: One Eleven Edmund Street, Birmingham, B3 2HJ. Registration Number: OC376604, FCA Reference: 586302.
Background
2Atlantic House, 72 New Bond Street. London W1S 1RR - Tel: 020 7043 0100
Authorised and Regulated by the Financial Conduct Authority Firm No. 586302
Contents
Why Launch?
Can it work?
Current Parameters
Collateral
Summary
Background
3Atlantic House, 72 New Bond Street. London W1S 1RR - Tel: 020 7043 0100
Authorised and Regulated by the Financial Conduct Authority Firm No. 586302
Why Launch?
RationaleInvestors have consistently identified the need for a Collective Investment structured product solution
to address the following:
• Ineligibility of direct securities such as institutional structures in Offshore Life Assurance Bonds
• Difficulty in including closed-end securities in Model Portfolio Services
• Managers not wanting to self-select individual securities
AHFM Structured Product Fund
Investment ObjectiveTo generate medium to long-term growth by investing in a diversified portfolio of structured
investments and derivatives linked to underlying assets.
Background
4Atlantic House, 72 New Bond Street. London W1S 1RR - Tel: 020 7043 0100
Authorised and Regulated by the Financial Conduct Authority Firm No. 586302
Capturing value?
Description PremiumFTSE*
PremiumFTSE/SPX*
6 year ATM put 17.78% 22.67%
6 year, 70% Eur KIP 13.89% 19.11%
6 year, 60% Eur KIP 11.66% 16.89%
Surprised?
* Based upon CLS pricing models as at 30th December 2013
Background
5Atlantic House, 72 New Bond Street. London W1S 1RR - Tel: 020 7043 0100Authorised and Regulated by the Financial Conduct Authority Firm No. 586302
Defined returns – autocall backtest (UPDATE)
AC Yr 2Coupon =2*12.29%
AC Yr 1Coupon =1*12.29%
AC Yr 1Coupon =1*10.53%
AC Yr 2Coupon =2*10.34%
AC Yr 1Coupon =1*9.95%
AC Yr 1Coupon =1*10.17%
AC Yr 1Coupon =1*10.34%
AC Yr 1Coupon =1*9.36%
AC Yr 6Coupon =6*8.58%
AC Yr 1Coupon =1*9.56%
AC Yr 1Coupon =1*9.56%
AC Yr 3Coupon =3*12.25%
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
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Jan-14
Jan-90
Jan-91
Jan-92
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
Jan-98
Jan-99
Jan-00
Jan-01
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
-20.00%
-10.00%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
AUTOCALL
FTSE (Price)
FTSE (Total)
AC Yr 2Coupon =2*8.60%
These figures represent simulated past performance, based upon the actual returns of the FTSE Price and Total Return Index. Past performance is not a reliable indicator of future performance.
Background
6Atlantic House, 72 New Bond Street. London W1S 1RR - Tel: 020 7043 0100Authorised and Regulated by the Financial Conduct Authority Firm No. 586302
Cumulative performance (not mark-to-market!)Ja
n-9
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0%
100%
200%
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400%
500%
600%
700%
800% FTSE Price Performance
maturity date
FTSE Total Return Per-formance
Current bid price of JPM 481 FTSE/S&P Defensive Autocall is 103.96p (CLS secondary market reference #481 on 11-Sep-13 closing bid)
Simulated Autocall portfolio outperformance over FTSE total return = 173.67% to date
These figures represent simulated past performance, based upon the actual returns of the FTSE Price and Total Return Index. Past performance is not a reliable indicator of future performance.
Background
7Atlantic House, 72 New Bond Street. London W1S 1RR - Tel: 020 7043 0100Authorised and Regulated by the Financial Conduct Authority Firm No. 586302
These figures represent simulated past performance, based upon the actual returns of the FTSE Price and Total Return Index. Past performance is not a reliable indicator of future performance.
Background
8Atlantic House, 72 New Bond Street. London W1S 1RR - Tel: 020 7043 0100
Authorised and Regulated by the Financial Conduct Authority Firm No. 586302
Investment Guidelines
Market Exposure• Predominantly major global equity indices with a bias to the UK, in either single or multi index
payoffs.
• At outset, only structures that provide for positive return, even in a down market will be included
in the portfolio.
Credit Exposure
• At outset, only issuers or counterparties with a credit rating of at least single A- will be included.
• Issuer or counterparty downgrades will trigger an Investment Committee review.
• 10% maximum exposure to any one single counterpart or issuer and subject to “5, 10, 40 rule”.
• No more than 5% of fund’s assets in any one single security.
9Atlantic House, 72 New Bond Street. London W1S 1RR - Tel: 020 7043 0100
Authorised and Regulated by the Financial Conduct Authority Firm No. 586302
Performance
10Atlantic House, 72 New Bond Street. London W1S 1RR - Tel: 020 7043 0100
Authorised and Regulated by the Financial Conduct Authority Firm No. 586302
Current Parameters
Based upon the portfolio as at 31st December 2013
Current Asset Allocation Market Risk
Summary of BarriersCredit Risk
27%
10%63%
Autocalls
Digitals
Cash
48%
29%
16%
7%
UK
North America
Europe (excl. UK)
Canada
8%5%
10%
5%
25%
48%
Credit Su-isse
HSBC
UBS
RBC
Gilts
Cash
Average cover to lowest +ve return 33.26%
Cover to lowest final return range 40.21% to 25.75%
Average cover to capital protection 39.54%
Cover to capital protection range 42.34% to 35.99%
11Atlantic House, 72 New Bond Street. London W1S 1RR - Tel: 020 7043 0100Authorised and Regulated by the Financial Conduct Authority Firm No. 586302
Current Parameters
Based upon invested portfolio as at 31st December 2013Note: Calculations do not consider credit spread movements of the issuers of the securities. The MTM of the securities and therefore the NAV of the fund will decrease as credit spreads widen and vice versa if spreads narrow.
Intrinsic Value for certain market moves
Market Move -20% -10% 0% +10% +20%
Intrinsic Value 150.33% 141.82% 119.48% 119.48% 119.48
GRY for certain market moves
Market Move -20% -10% 0% +10% +20%
GRY 7.33% 7.53% 7.01% 7.01% 7.01%
Expected Change in ValueTime/Market Move -20% -10% 0% 10% 20%
3 month -16.47% -6.26% 0.23% 3.57% 5.34%
1 year -11.89% -1.25% 5.74% 9.74% 11.94%
2 year -4.83% 5.96% 13.05% 17.13% 19.35%
3 year 4.17% 15.24% 21.95% 25.52% 27.41%
12Atlantic House, 72 New Bond Street. London W1S 1RR - Tel: 020 7043 0100Authorised and Regulated by the Financial Conduct Authority Firm No. 586302
Based upon invested portfolio as at 31st December 2013Note: Calculations do not consider credit spread movements of the issuers of the securities. The MTM of the securities and therefore the NAV of the fund will decrease as credit spreads widen and vice versa if spreads narrow.
13Atlantic House, 72 New Bond Street. London W1S 1RR - Tel: 020 7043 0100Authorised and Regulated by the Financial Conduct Authority Firm No. 586302
Intrinsic value for certain market moves
Based upon invested portfolio as at 31st December 2013Note: Calculations do not consider credit spread movements of the issuers of the securities. The MTM of the securities and therefore the NAV of the fund will decrease as credit spreads widen and vice versa if spreads narrow.
CLS trade Structure Bank Description -20% -10% 0% 10% 20%
14Atlantic House, 72 New Bond Street. London W1S 1RR - Tel: 020 7043 0100Authorised and Regulated by the Financial Conduct Authority Firm No. 586302
GRY for certain market moves
Based upon invested portfolio as at 31st December 2013Note: Calculations do not consider credit spread movements of the issuers of the securities. The MTM of the securities and therefore the NAV of the fund will decrease as credit spreads widen and vice versa if spreads narrow.
CLS trade Structure Bank Description -20% -10% 0% 10% 20%
15Atlantic House, 72 New Bond Street. London W1S 1RR - Tel: 020 7043 0100Authorised and Regulated by the Financial Conduct Authority Firm No. 586302
Why buy a Gilt?
Fund
Investor
CashReturn
Market
Cash
Gilt
Market
Gilt flows - fixed
Libor +4!!Market
Libor +4!!
SP payoff: Autocall, Digital, etc
Market
Sell CDS?
Receive 100bps p.a?
Background
16Atlantic House, 72 New Bond Street. London W1S 1RR - Tel: 020 7043 0100
Authorised and Regulated by the Financial Conduct Authority Firm No. 586302
Summary
Continue to steadily invest
Consider selling some existing investments – those with low GRY
Won’t be a smooth 7% per annum – think autocall backtest
Continue to buy low!
Try and Sell high!
17Atlantic House, 72 New Bond Street. London W1S 1RR - Tel: 020 7043 0100
Authorised and Regulated by the Financial Conduct Authority Firm No. 586302
Disclaimer
The information in this document is derived from sources believed to be reliable but which have not been independently verified. Atlantic House Fund Management makes no guarantee of its accuracy and completeness and is not responsible for errors of transmission of factual or analytical data, nor is it liable for damages arising out of any person’s reliance upon this information. All charts and graphs are from publicly available sources or proprietary data. The opinions in this document constitute the present judgment of Atlantic House Fund Management, which is subject to change without notice. This document is neither an offer to sell, purchase or subscribe for any investment nor a solicitation of such an offer. This document is intended for the use of institutional and professional customers and is not intended for the use of private customers. This document is not intended for distribution in the United States of America or to US persons. This document is intended to be distributed in its entirety. No consideration has been given to the particular investment objectives, financial situation or particular needs of any recipient.
Atlantic House Fund Management LLP registered in England and Wales, Registered Office : One Eleven Edmund Street, Birmingham, B3 2HJ. Registration
