COMMODITY STRUCTURED NOTES Introducing The World s Oldest Asset Class... For Today s Investors
Who can benefit from Commodity Structured Notes? Corporate or commercial clients looking to hedge commodity market risk Institutional clients such as pension funds or endowments looking for portable alpha High net worth individuals looking for commodity investment exposure A FLEXIBLE SOLUTION FOR COMMODITIES INVESTING Whether you are seeking exposure to commodities as an asset class, need to hedge against risk or are looking for enhanced returns, our commodity structured notes allow for complete flexibility to meet your investment objectives. At RBC Capital Markets, we bring you a complete range of innovative structured notes and sound expertise you can rely on. Our specialized Commodity Structured Notes Trading Team has extensive experience in financial engineering and derivatives, which has made RBC Capital Markets a recognized industry leader in the design and issuance of commodity structured notes. Interest in commodity structured notes has increased significantly over the past several years due to the rise in commodity markets. As investors continue to seek diversified, enhanced revenue streams, commodities have become a genuine asset class in their own right. The need for flexible commodity solutions has also grown as investors have realized they are no longer restricted to traditional methods of managing commodity market exposure. The result: greater access to commodity markets in a way that was previously unimaginable. Commodity structured notes are designed to suit an investor s specific requirements. Perhaps more importantly, commodity structured notes can be delivered to clients without the same issues that come with conventional commodities investing.
WHY INVEST IN COMMODITY STRUCTURED NOTES? As returns are now available from various underlying assets, this has created tremendous investment opportunities. For instance, today s commodity structured notes can offer flexibility of: maturity underlying commodity market(s) credit exposure currency principal protection leverage directional bias Generally speaking, commodity structured notes are used in one of two ways: As an efficient way to invest in commodities as an asset class As a highly flexible hedging tool for managing commodity market risk 1. An Investment With varied returns from stocks and bonds, combined with the added impact of inflation, investors have been looking at a broader range of assets, including commodities, to increase their returns and manage risk. The benefits of investing in a diversified basket of commodities are many: Potential for long-term, real returns A negative historical correlation with stocks and bonds An effective hedge against geopolitical risk and natural disasters Potential reduction of interest rate or inflation risk Liquidity The movement towards commodities investing has also been linked to growth in G7 and Asian economies, extremely tight global commodity inventories, climate change and increased interest in alternative energies such as biofuels. Whatever the case, the use of commodity structured notes as the investment vehicle of choice is undisputed. In fact, multi-billion dollar mutual funds are now using structured notes to deliver commodity exposure given their flexibility, effectiveness and cost efficiency. 2. A Hedging Tool Standard hedging tools for commodity risk management have frustrated even the most seasoned market veteran. At one end of the spectrum they are seen as completely inaccessible and at the other, as unbelievably complex. Our philosophy at RBC Capital Markets: make the product fit the investor. We encourage close interaction and prompt communications with our clients and seek to develop an in-depth understanding of each investor s business objectives.
WHAT ARE THE FEATURES OF A COMMODITY STRUCTURED PRODUCT? Access While it is true that all commodity markets can be accessed by investors, not all investors have access to commodity markets. Traditional approaches have forced investors to gain exposure vicariously through related asset classes, regulated futures exchanges or legally intensive multi-party agreements. Our structured notes offering is based on the idea of delivering commodity market access in such a way that it fits a client s particular requirements. Protection Commodity structured notes can provide a solution that is coupled with 100 per cent principal protection at maturity, partial principal protection or full principal at risk depending upon the client s needs and underlying market parameters. Delivery RBC Capital Markets can deliver commodity market access in a wide variety of well known securitized formats, such as: Deposit note Certificate of deposit Certificate Warrants We can also issue off the world s largest platforms such as CDS, EMTN and US MTN and through over-the-counter products in funded or unfunded format. Credit Rating In many instances, RBC will serve as the obligor on a commodity structured note, but there are many different issuers that can be accessed such as governments, government agencies, corporations and financial institutions. The credit ratings of these issuers typically range from BBB to AAA, and can suit virtually any client s risk appetite. Participation Commodity structured notes can be designed to match virtually any risk-reward profile, and the concept of participation is used when one side of that profile has a higher weighting than the other. In contrast to more typical products, which offer a 1:1 risk-reward profile, our Structured Notes Trading Team can create linear, geometric, compound or exotic models to meet a specific customer need. Combining Asset Classes We work with various groups within RBC Capital Markets to bring our clients expertise across a range of asset classes and to connect commodities to other markets such as credit, equities, fixed income, foreign exchange and interest rates.
WHY INVEST WITH RBC CAPITAL MARKETS? The answer is, quite simply, that we re unwavering in our belief that each client is unique and should be treated as such. At RBC Capital Markets, we don t measure individuals using a one-size-fits-all approach as many other financial institutions do. Rather, we work closely with investors to determine their financial objectives and develop products that meet their needs and desired comfort level. Our Commodity Structured Notes Trading Team recognizes that simplicity and complexity are relative concepts that are highly dependent upon the individual client. For instance, a small provincial grain farmer has different goals than a corporate utility, which in turn has a different skill set and risk profile than a multi-billion dollar commodity mutual fund. Traditional solutions have failed to address these varying needs. Built on a Strong Foundation RBC Capital Markets is the international corporate and investment bank of Royal Bank of Canada (RBC). Operating since 1869, RBC has more than USD500 billion in assets and one of the highest credit ratings of any financial institution Moody s Aaa and Standard & Poor s AA-. Today, RBC serves more than 15 million clients worldwide, delivering products and services through 70,000 employees in offices in every major North American city and across South America, Europe, Asia and Australasia.
Contact Us For more information about our Commodity Structured Notes business, please email us at RBCcommoditynotes@rbccm.com The information contained in this brochure has been compiled from sources believed to be reliable, but no representation or warranty, express or implied, is made by Royal Bank of Canada, RBC Capital Markets, its affiliates or any other person as to its accuracy, completeness or correctness. Nothing in this brochure constitutes legal, accounting or tax advice or individually tailored investment advice. This brochure is prepared for general circulation to clients and prospective clients and has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. This brochure is not an offer to sell or a solicitation of an offer to buy any securities or to take any deposits or provide any financing. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Every province in Canada, every state in the U.S., and most countries throughout the world have their own laws regulating the types of securities and other investment products which may be offered to their residents, as well as the process for doing so. As a result, the products and services discussed in this brochure may not be eligible for sale or otherwise in some jurisdictions. This brochure is not, and under no circumstances should be construed as, a solicitation to act as securities broker or dealer or otherwise in any jurisdiction by any person or company that is not legally permitted to carry on the business of a securities broker or dealer or otherwise in that jurisdiction. To the full extent permitted by law neither RBC Capital Markets nor any of its affiliates, nor any other person, accepts any liability whatsoever for any direct or consequential loss arising from any use of this brochure or the information contained herein. No matter contained in this document may be reproduced or copied by any means without the prior consent of RBC Capital Markets. To US Residents: This brochure has been approved by RBC Capital Markets Corporation and RBC Dain Rauscher Inc., each of which is a U.S. registered broker-dealer and accepts responsibility for this brochure and its dissemination in the United States. To Canadian Residents This brochure has been approved by RBC Dominion Securities Inc. Any Canadian recipient of this brochure that is not a Designated Institution in Ontario, an Accredited Investor in British Columbia or Alberta or a Sophisticated Purchaser in Quebec (or similar permitted purchaser in any other province) and that wishes further information regarding, or to effect any transaction in, any of the securities discussed in this brochure should contact and place orders with RBC Dominion Securities Inc., which, without in any way limiting the foregoing, accepts responsibility for this brochure and its dissemination in Canada. To U.K. Residents: This brochure has been approved by Royal Bank of Canada Europe Limited ( RBCEL ), which is authorised and regulated by Financial Services Authority ( FSA ), in connection with its distribution in the United Kingdom. This brochure is not for distribution to private customers as defined by the FSA. RBCEL accepts responsibility for this brochure and its dissemination in the United Kingdom. Past performance is not indicative of future performance. Copyright RBC Capital Markets Corporation 2006 Member SIPC Copyright RBC Dain Rauscher Inc 2006. Member SIPC Copyright RBC Dominion Securities Inc. 2006 Member CIPF Copyright Royal Bank of Canada 2006 All rights reserved. Registered trademark of Royal Bank of Canada. RBC Capital Markets is a registered trademark of Royal Bank of Canada. Used under licence. www.rbccm.com