Structured Products in Private Wealth Management Moscow 16 th June 2010 Risk & return Russia 2010 1
Content Introduction to Lakeshore International Vision, Profile, Strengths & Services Definition of Structured Products Risks and chances with Structure Products Different investment solutions with Structure Products Portfolio structures with Derivative Instruments Questions and Answers 2
Lakeshore International Vision Our vision is to be an independent premium provider of comprehensive financial services to HNW and qualified institutional clientele around the globe. Our belief is that a thorough understanding of client needs, combined with well balanced and comprehensive services, a consultative approach, the experience and professionalism of quality employees and transparency are essential to the success of any investment advisory business. 3
Lakeshore International Profile Founded 2008 as a partnership (share capital CHF 1m) Independent Asset Manager (Member of Swiss Association of Asset Managers) Substantial investor in own funds Comprehensive services to HNWIs & Institutions Globally focused with considerable inroads into Eastern Europe, Russia & Asia Offices: Zurich, Moscow, (China planned) 20+ Staff 4
Lakeshore International - Strengths Flexible, solution driven, tailor-made approach, client focused Comprehensive & transparent Independent (partners, products etc.) Team has over 100 years combined experience in global financial markets In-depth local research with relevant industry experience Ongoing development of & investment in quality staff Global with strong regional focus 5
Lakeshore International Services Asset Management & Fund Management (LIBF & LISOF) Wealth Management (advisory, discretionary, asset allocation & portfolio construction, risk management & investment controlling) Family Office Services (fully understand the unique needs & aspirations of each family according to their history, tradition & values) 6
Definition of Structured Products A structured product is generally a pre-packaged investment strategy which is based on derivatives, such as a single security, a basket of securities, options, indices, commodities, debt issuances and/or foreign currencies, and to a lesser extent, swaps. They have arisen out of the significant product development within the financial industry over the last number of years & have acquired a strong position within international financial markets in the last 10 years. Structured products remain on real value as equities, bonds, indices or commodities. They offer an alternative to traditional investment solutions across the various asset classes / categories portfolio structures 7
Chances with Structure Products The investor can access new investment themes and markets The investor can secure positive returns in all market solutions, more investment opportunities than with traditional investments The investor can micro-manage investment risk 8
Chances with Structured Products Traditionally an investor is invested in one of the previously mentioned asset classes and would typically hold a long view. Structured products allow investors to participate in a non long way... They offer to the investor an attractive way to participate in markets with different risk profiles. Structured products are like the grains of sand on a beach there are endless solutions available to the investor dependant on their particular market view / investor profile. 9
Risks with Structure Products Structure products give you certain claims against the issuer, which is why issuer quality is so important. Risks vary depending on the type of product used by the investor. Some structure products are more suited to investors with a small appetite for risk, whereas others carry more risk. It is important to understand the risks involved with a specific product and its underlying, and that you discuss these with your client advisor your private banker. 10
Different investment solutions with Structured Products Structure Products can be used in all market situations. Different investors have different ideas for markets. In Switzerland on Scoach (www.scoach.ch) a rise of new issues of products since 2008 is shown. Currently more than 20 000 products are listed. It is a jungle of products. How can the investor make a selection? 11
Types of Structured Products Leverage effect Participation Yield (example shown) Capital protection 12
Market Shares in Switzerland 7.60% 18.08% 9.85% 12.12% Market Shares 29.85% 22.50% Vontobel Zürcher Kantonalbank Deutsche Bank UBS Julius Bär Various Source: Derivative Partners AG 13
Example Reverse Convertible Single Reverse Convertible Example by Bank Vontobel AG Vontobel is one of the biggest player in the Swiss market of Structure Products 14
13 April 2007 Slide 15 Defender Vonti ( worst of structure) Your Investment Idea Above-average coupon payment Moderately positive or somewhat bearish market expectation Partial capital protection Our Solution Defender Vonti: Short Down-and-In Puts on an underlying, combined with parallel investment in the money market Benefit from high volatilities, the coupon will be paid in any event If the underlying reached the barrier, the underlying will be delivered at the expiry.
13 April 2007 Slide 16 Indicative terms for a Defender Vonti on GAZPROM ADR Indication as of 6th April, 2010 Underlying Gazprom ADR, price USD 24.30 Maturity 1 Year Barrier 70 % Currency USD, minimum Size USD 100 000 Coupon 12 % Issuer / Lead Manager Bank Vontobel Dubai / Bank Vontobel AG, Zürich Secondary Market Spread Maximal 1.00%* Listing Yes, if desired, otherwise Private Placement *Under normal market conditions
13 April 2007 Slide 17 Defender Vonti ( worst of structure) Settlement mode: If the underlying never reaches nor breaches the barrier between the issue date and the final fixing date, the notional will be paid back for each Defender Vonti independently of the underlying price at maturity. In addition, the coupon is paid out at maturity. If the underlying ever reaches or breaches the barrier between the issue date and the final fixing date, the following applies: 1. If the final fixing of the underlying is lower than the exercise price, the notional will be paid back for each Defender Vonti. In addition, the coupon is paid out at maturity. 2. If the final fixing of the underlying is lower than the exercise price, the number of underlying per Defender Vonti will be physically delivered for each Defender Vonti. In addition, the coupon is paid out at maturity.
Portfolio structures with Derivative Instruments The investor can structure the portfolio and all asset classes with Derivative Instruments: Cash/money market Bonds Equities Alternative instruments (such as: Commodities / Gold / Properties / Private Equities / Hedge Funds) 18
Portfolio structures with Derivative Instruments Cash/money market Money market products from different providers Futures and options, standard products listed on a exchange 19
Portfolio structures with Derivative Instruments Bonds Structured products from different providers with different risk profiles Futures and options, standard products listed on a exchange Exchange Traded Notes (ETN) 20
Portfolio structures with Derivative Instruments Equities ETF on Global indices Structure products as an Discount Certificate see Example and various products from different providers Traded options listed on a exchange 21
Portfolio structures with Derivative Instruments Alternative instruments Commodities / Gold/ Properties / Private Equities / Hedge Funds Tracker on various Commodities or Gold Exchange Traded Commodities (ETC) ETF on properties as an example the IShares on UK property 22
Profile Christoph Portmann, partner, member of the Board of Directors and member of the Executive Board Christoph Portmann has 19 years experience in advising international clientele in Wealth Management. Before joining Lakeshore International he headed up the Eastern European Private Banking team after joining Schroder & Co Bank AG, Zurich in 2005. Prior to this he was Head of Sales for Derivative & Structured Products for Bank Vontobel AG before he joined the Private Banking team in 1997. Christoph Portman is a qualified banker having graduated from the Swiss Banking School Executive Program in 2000. He is also an experienced trader in futures & options. Since 2000 he is in the foundation board of the pension fund of the city of Lucerne. 23
Contact Zurich Lakeshore International Management Inc Usteristr. 14, CH-8001 Zurich, Switzerland Telephone: +41 44 215 31 11 Fax: +41 44 215 31 12 E-Mail: info@lakeshore-international.com Moscow LLC Lakeshore International Management Krasnaya Presnya Str. 24 Business-Center «Tropicana», 8 th floor 123022 Moscow, Russia Telephone: +7 495 411 62 14 Fax: +7 495 253 21 08 E-Mail: info@lakeshore-international.com 24
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