EP1543458A1 - Fonds synthetiques avec titres obligataires structures - Google Patents

Fonds synthetiques avec titres obligataires structures

Info

Publication number
EP1543458A1
EP1543458A1 EP03766831A EP03766831A EP1543458A1 EP 1543458 A1 EP1543458 A1 EP 1543458A1 EP 03766831 A EP03766831 A EP 03766831A EP 03766831 A EP03766831 A EP 03766831A EP 1543458 A1 EP1543458 A1 EP 1543458A1
Authority
EP
European Patent Office
Prior art keywords
structured note
fund
valuation
note
structured
Prior art date
Legal status (The legal status is an assumption and is not a legal conclusion. Google has not performed a legal analysis and makes no representation as to the accuracy of the status listed.)
Ceased
Application number
EP03766831A
Other languages
German (de)
English (en)
Other versions
EP1543458A4 (fr
Inventor
Peter C. Freund
Current Assignee (The listed assignees may be inaccurate. Google has not performed a legal analysis and makes no representation or warranty as to the accuracy of the list.)
Chase Bank USA NA
Original Assignee
Bank One Delaware NA
Priority date (The priority date is an assumption and is not a legal conclusion. Google has not performed a legal analysis and makes no representation as to the accuracy of the date listed.)
Filing date
Publication date
Application filed by Bank One Delaware NA filed Critical Bank One Delaware NA
Publication of EP1543458A1 publication Critical patent/EP1543458A1/fr
Publication of EP1543458A4 publication Critical patent/EP1543458A4/fr
Ceased legal-status Critical Current

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Classifications

    • G—PHYSICS
    • G07—CHECKING-DEVICES
    • G07F—COIN-FREED OR LIKE APPARATUS
    • G07F7/00—Mechanisms actuated by objects other than coins to free or to actuate vending, hiring, coin or paper currency dispensing or refunding apparatus
    • G07F7/08—Mechanisms actuated by objects other than coins to free or to actuate vending, hiring, coin or paper currency dispensing or refunding apparatus by coded identity card or credit card or other personal identification means
    • G07F7/0866—Mechanisms actuated by objects other than coins to free or to actuate vending, hiring, coin or paper currency dispensing or refunding apparatus by coded identity card or credit card or other personal identification means by active credit-cards adapted therefor
    • G—PHYSICS
    • G06—COMPUTING; CALCULATING OR COUNTING
    • G06Q—INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR
    • G06Q20/00—Payment architectures, schemes or protocols
    • G—PHYSICS
    • G06—COMPUTING; CALCULATING OR COUNTING
    • G06Q—INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR
    • G06Q20/00—Payment architectures, schemes or protocols
    • G06Q20/04—Payment circuits
    • G06Q20/06—Private payment circuits, e.g. involving electronic currency used among participants of a common payment scheme
    • G—PHYSICS
    • G06—COMPUTING; CALCULATING OR COUNTING
    • G06Q—INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR
    • G06Q20/00—Payment architectures, schemes or protocols
    • G06Q20/30—Payment architectures, schemes or protocols characterised by the use of specific devices or networks
    • G06Q20/36—Payment architectures, schemes or protocols characterised by the use of specific devices or networks using electronic wallets or electronic money safes
    • G06Q20/363—Payment architectures, schemes or protocols characterised by the use of specific devices or networks using electronic wallets or electronic money safes with the personal data of a user
    • G—PHYSICS
    • G06—COMPUTING; CALCULATING OR COUNTING
    • G06Q—INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR
    • G06Q40/00—Finance; Insurance; Tax strategies; Processing of corporate or income taxes
    • G06Q40/04—Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
    • G—PHYSICS
    • G06—COMPUTING; CALCULATING OR COUNTING
    • G06Q—INFORMATION AND COMMUNICATION TECHNOLOGY [ICT] SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES; SYSTEMS OR METHODS SPECIALLY ADAPTED FOR ADMINISTRATIVE, COMMERCIAL, FINANCIAL, MANAGERIAL OR SUPERVISORY PURPOSES, NOT OTHERWISE PROVIDED FOR
    • G06Q40/00—Finance; Insurance; Tax strategies; Processing of corporate or income taxes
    • G06Q40/06—Asset management; Financial planning or analysis

Definitions

  • the present invention relates generally to investing, and more particularly, to a structured investment vehicle that provides superior returns while reducing costs to investors.
  • hedge fund generally refers to private investment limited partnership vehicles run by managers who are compensated primarily based on performance, rather than based on fixed fees or a fixed percentage of the assets under their management. Often, hedge fund managers have a personal stake in the assets. Typically, the hedge fund manager is a general partner in the partnership and, the investors are limited partners. Typically, the strategy is set out in and governed by the partnership agreement created for the fund.
  • hedge funds may broadly utilize various asset types and various strategies for managing those asset types.
  • the asset types may include equities, bonds, cu ⁇ encies, precious metals, commodities, and so forth.
  • the investment instruments may include conventional stock purchase, options, futures, and the like.
  • the strategies may include long positions, short positions, hedging, leverage, derivatives, arbitrage and the like, and combinations of the aforementioned.
  • the point of hedges is that the assets and the strategies are selected by the fund manager according to any appropriate mix ⁇ a mix that will change as economic conditions change—to achieve good absolute returns.
  • the concept of absolute returns is key in hedge fund theory. This is because the goal is not to outperform any particular market or index, but the goal is to provide a good absolute return irrespective of any particular market or index. This makes sense because the hedge fund may reallocate its assets, instruments, and strategies to avoid the downturns or limitations of any particular market or index.
  • hedge funds will compensate their managers based on a portion of profits, such as quarterly or annually. Fees of 15% or 30% of profits (so-called “performance fee”) are not uncommon. A fee for fund management expenses (so-called “management fee”) is typically charged to cover the manager's expenses, typically about 1-3% of the funds invested. To the extent the fund manager has a personal stake in the funds, he is compensated in that regard as well for any growth. Therefore, the other key aspect of hedge funds that distinguishes them from conventional investment vehicles is the incentive-based compensation for the manager. This is in contrast to conventional brokerages which are compensated based on transaction fees unrelated to performance. Thus, hedge funds eliminate the motivation to "churn.”
  • hedge funds suggests that they employ hedging strategies, this is not always the case.
  • Those that employ hedging may use risk mitigation strategies by selecting an element of the market (e.g., it could be a sector such as telecommunications, or it could be the entire market), and then designing their investment strategy to invest in that element of the market while minimizing risk from investment cycles.
  • an element of the market e.g., it could be a sector such as telecommunications, or it could be the entire market
  • a hedge fund manager whose fund is based on utility stocks may broadly purchase equities in that sector, while also acquiring "put" options to sell should that sector slump.
  • the goal of many hedge funds is to have a zero "beta" relative to the broader equities market.
  • the hedge fund's performance is preferably unrelated to the market's performance, i.e., it is "market neutral.” This can be accomplished in various fashions.
  • One common strategy is so-called “pairs trading," where the fund's manager seeks to buy and sell equities in pairs, the buy being for a relatively undervalued stock (relative to the rest of that sector) and the sell being for a relatively overvalued stock.
  • airs trading where the fund's manager seeks to buy and sell equities in pairs, the buy being for a relatively undervalued stock (relative to the rest of that sector) and the sell being for a relatively overvalued stock.
  • Implementation of hedging using such strategies not only favors the investors in those hedge funds, but the overall market benefits by becoming more liquid as a result of the capture of the spread in the market.
  • a fund-of-hedge funds may be a fund, such as a mutual fund, that invests in hedge funds.
  • a fund-of-fimds may be a fund that holds several classes of assets, such as stocks and bonds.
  • the fund-of-funds interests are issued as shares that correlate to the underlying assets.
  • a fund-of-funds is run by a manager who can be viewed as managing the managers associated with the underlying funds.
  • Fund-of-funds are often implemented as a means to invest in multiple hedge funds. Because of their high minimums and other restrictions, the average investor cannot invest in multiple hedge funds. A fund-of-funds, however, can be set up that invests in various hedge funds without requiring a substantial investment for each investor. The manager of the fund-of-funds, therefore, can diversify risk among the multiple managers of the underlying hedge funds. Generally, fund-of-funds managers select the funds to diversify strategy, although not always. For example, a strategy specific fund-of-funds might be a fund of market neutral funds that only invests in market neutral funds.
  • one aspect of the invention is to address one or more of the drawbacks set forth above.
  • Another aspect of the present invention is to provide investment opportunities that track conventional asset-based investments (e.g., hedge funds, fund-of- funds, mutual funds, etc.) without requiring the synthetic funds manager/obligor to purchase the underlying asset.
  • conventional asset-based investments e.g., hedge funds, fund-of- funds, mutual funds, etc.
  • a further aspect of the invention is to provide investments, described as structured notes (which may include saps, derivatives, contracts, trusts, and other types of investments), with features and options that to date have typically only been available to institutional investors.
  • structured notes which may include saps, derivatives, contracts, trusts, and other types of investments
  • An additional aspect of the invention is to provide consumers/brokers the ability to: structure notes in real time, with tradable pricing/values; review how the notes would have performed during different historical periods; select features and options that optimize the investor's goals based on their risk utility function and outlook; execute and memorialize the trade immediately without risk of rekeying e ⁇ ors or other human mistakes.
  • a process for creating and issuing a synthetic fund with an unsecured structured note comprises receiving a request to purchase at least one structured note, where the request comprises an amount of the at least one structured note and at least one term of the at least one structured note, generating the at least one structured note based on the request, receiving payment for the at least one structured note, and issuing the at least one structured note, where the at least one structured note is an unsecured liability of the obligor.
  • a process for creating and issuing a synthetic fund comprises receiving a request to purchase at least one structured note, where the request comprises an amount of the at least one structured note and at least one term of the at least one structured note, where the at least one term of the note includes a valuation of the at least one structured note based on at least one objective valuation measure and a time period for redeeming the at least one structured note, generating the at least one structured note based on the request, receiving payment for the at least one structured note, and issuing the at least one structured note, where the at least one structured note is an unsecured liability of the obligor.
  • a process for creating and issuing a synthetic fund comprises receiving a request to purchase at least one structured note, where the request comprises an amount of the at least one structured note and at least one term of the at least one structured note, where the at least one term of the note includes: a) a valuation of the at least one structured note based on at least one objective valuation measure, where the valuation is based on the at least one objective valuation measure without a predetermined amount of fees associated with the objective evaluation measure and a time period for redeeming the at least one structured note, where the valuation of the at least one structured note is based in part on the time period for redeeming the at least one structured note, generating the at least one structured note based on the request, receiving payment for the at least one structured note, where the payment for the structured note is based on the objective valuation measure at the time of the payment, and issuing the at least one structured note, where the at least one structured note is an unsecured liability of the obligor.
  • Another exemplary aspect of the invention provides a synthetic fund for purchase as a financial product comprising a structured note issued by an obligor, where the structured note is an unsecured liability of the obligor, and the structure note comprises at least one term, where the at least one term includes a valuation based on at least one objective valuation measure.
  • a synthetic fund for purchase as a financial product comprises a structured note issued by an obligor, where the structured note is an unsecured liability of the obligor, and the structure note comprises at least one term, where the at least one term includes a valuation based on at least one objective valuation measure and a time period for redeeming the at least one structured note, where payment for the structured note is based on the objective valuation measure at the time of the payment.
  • a synthetic fund for purchase as a financial product comprises a structured note issued by an obligor, where the structured note is an unsecured liability of the obligor, and the structure note comprises a plurality of terms comprising a valuation based on at least one objective valuation measure without a predetermined amount of fees associated with the objective evaluation measure and a time period for redeeming the at least one structured note, where the valuation of the at least one structured note is based in part on the time period for redeeming the at least one structured note, and where payment for the structured note is based on the objective valuation measure at the time of the payment.
  • a system for issuing a structured note for a synthetic fund comprises a request module for receiving a request to purchase the structured note, a generating module for generating the structured note, a purchase module for receiving payment to purchase the structured note, and an issuing module for issuing the structured note in response to the request, where the structured note is an unsecured liability of the obligor.
  • An additional embodiment of the invention provides a system for issuing a structured note for a synthetic fund.
  • the system comprises a request module for receiving a request to purchase the structured note, where the request comprises the terms of the structured note and the amount of purchase, and where the terms of the at least one structured note further comprise the valuation of the structured note and a time period for redeeming the at least one structured note, a generating module for generating the structured note, where the generating module generates a unique identifier for the structured note and where the purchaser has an identifier, an purchase module for receiving payment to purchase the structured note, an issuing module for issuing the structured note in response to the request, where the structured note is an unsecured liability of the obligor and a storage module, where the storage module stores and links the unique identifier for the structured note and the purchaser identifier.
  • a system for issuing a structured note for a synthetic fund comprises means for receiving a request to purchase the structured note, means for generating the structured note, means for receiving payment to purchase the structured note, and means for issuing the structured note in response to the request, where the structured note is an unsecured liability of the obligor.
  • a system for issuing a structured note for a synthetic fund comprises means for receiving a request to purchase the structured note, where the request comprises the terms of the structured note and the amount of purchase, and where the terms of the at least one structured note further comprise the valuation of the structured note and a time period for redeeming the at least one structured note, means for generating the structured note, where the generating module generates a unique identifier for the structured note and where the purchaser has an identifier, means for receiving payment to purchase the structured note, means for issuing the structured note in response to the request, where the structured note is an unsecured liability of the obligor and means for storing and linking the unique identifier for the structured note and the purchaser identifier.
  • a further exemplary embodiment provides a computer readable medium for causing a process to issue a structured note for a synthetic fund comprising code for receiving a request to purchase the structured note, code for generating the structured note, code for receiving payment to purchase the structured note and code for issuing the structured note in response to the request, where the structured note is an unsecured liability of the obligor.
  • a computer readable medium for causing a processor to issue a structured note for a synthetic fund comprises code for receiving a request to purchase the structured note, where the request comprises the terms of the structured note and the amount of purchase, and where the terms of the at least one structured note further comprise the valuation of the structured note and a time period for redeeming the at least one structured note, code for generating the structured note, where the generating module generates a unique identifier for the structured note and where the purchaser has an identifier, code for receiving payment to purchase the structured note, code for issuing the structured note in response to the request, where the structured note is an unsecured liability of the obligor, and code for storing and linking the unique identifier for the structured note and the purchaser identifier.
  • Fig. 1 illustrates the relationship between an obligor, the market and one or more customers according to an embodiment of the invention.
  • Fig. 2 illustrates a process for generating and issuing a structured note according to an embodiment of the invention.
  • Fig. 3 illustrates a conventional funds-of-funds where the underlying assets are hedge funds according to an embodiment of the invention.
  • Fig. 4 illustrates an embodiment of the synthetic fund-of-funds according to an embodiment of the invention.
  • Fig. 5 illustrates a system for implementing a synthetic fund having one or more structured notes according to an embodiment of the invention.
  • Fig. 6 illustrates a graphic user interface for manipulating terms according to an embodiment of the invention.
  • Fig. 7 illustrates a graphic user interface displaying the output of manipulated terms according to an embodiment of the invention.
  • Fig. 8 illustrates a graphic user interface displaying a report of the status of a structured note to the owner according to an embodiment of the invention.
  • a system and process for synthetic funds is described.
  • the system and process make use of existing funds to provide investment opportunities in structured notes.
  • One technical effect of the invention is to provide a system and process for issuing a structure note for a synthetic fund for investment purposes.
  • Various aspects and components of this system and process are described below. While the present invention is described in terms of structured notes issued by an obligor, it is recognized that swaps, derivatives, contracts, trusts and other types may also be used, individually or in combination, as the basis for synthetic funds.
  • a structured note such as within a synthetic mutual fund structure, may replace thinly capitalized fund managers with an issuer (also referred to as an "obligor").
  • an obligor may be a creditworthy structure note issuer supported by substantial balance sheets.
  • an investor may purchase one or more notes, structured to provide customized equity returns/exposure (also refe ⁇ ed to as "structured notes"). Terms of each structured note may be specified by the purchaser.
  • structured notes may be unsecured liabilities of the obligor, e.g., there are no underlying assets upon which the structure note is based.
  • structured note payment obligations may be related to the performance of an objective valuation, but structured note holders will depend on the good credit of the obligor for payment.
  • a value in selling structured note may occur in that the obligor receives the cash from the purchaser, This provides the purchaser with the ability to leverage a position, enter a short position, take certain risks, use a derivative, provide a credit risk on an institution, or other actions.
  • Use of a structured note may avoid the use of collateral and margin calls when a purchasers position becomes strongly negative.
  • Fig. 1 illustrates the relationship between an obligor, the market and one or more customers (hereinafter also refe ⁇ ed to as "purchasers,” “investors,” “consumers,” and “users”)according to an embodiment of the invention.
  • Obligor 100 is in communication with one or more customers 110.
  • customers 110 are illustrated as customer A 111, customer B 112 through customer N 113, where N is a whole number. It will be recognized that various numbers and types of customers may be involved.
  • Market 120 comprises the entire market of objective valuation measures and their underlying assets.
  • mutual funds 121, bond funds 122 and hedge funds 123 are illustrated.
  • market 120 represents the entire world of objective valuation measures and their underlying assets, and includes other assets.
  • investors 110 are further in indirect contact with market 120, illustrated by dashed lines 140.
  • investors 110 indirectly contact market 120 via receipt of information about the market.
  • values of mutual funds, bond funds, hedge funds, individual stocks, bonds, real estate and commodities and other assets in the market are often published in newspapers and on the internet. Further, many funds advertise their valuations in the hopes of attracting new investors. Thus, investors 110 may indirectly contact various aspects of market 120 to determine what investments they desire.
  • Investors 110 may directly contact obligor 100 to purchase a structured note based on one or more objective valuation measures within market 120.
  • investor 111 directly contacts obligor 100 and requests to purchase a structured note.
  • investor 111 may request that the structured note be value based on a bond fund 122 objective valuation measure.
  • obligor 100 issues the structured note. Further, obligor may then directly contact market 120 to purchase the underlying assets associated with objective valuation measure.
  • an obligor may manage the structured note liability very efficiently.
  • structured notes may represent a large and diversified portfolio of exposures.
  • the vast bulk of the exposure may be captured by generic indices.
  • generic equity indices e.g., the "Standard & Poor 500" ® index, the "Wilshire 5000" ® index, the "Russell 2000” ® index, etc.
  • the risk may be hedged in a number of standard ways, using stocks, futures or derivatives. As the dominant index risk will change slowly and turnover will be low with index funds, transaction costs for the obligor will be reduced.
  • the obligor generally will have periodic snapshots (e.g., quarterly, semi-annually, etc.) of the actual holdings of every objective measure.
  • a mutual fund may make semi-annual or quarterly reports publicly available of its holdings.
  • the obligor can reduce its tracking e ⁇ or to an arbitrarily small number by adjusting: the bulk index hedge; sector index hedges; individual stocks or other underlyings (securities, funds, etc.); the cash position; the weighting of small capitalization share holdings as compared to large capitalization share holdings, etc.
  • structured note holders may shape the risk and return of an investment (by introduction of option or other derivative characteristics) in a manner previously only available to institutional investors.
  • structured note purchasers can, by selecting various parameters for the structured note, individualize the investment in the same manner as afforded institutional investors.
  • Managing option exposures is a scale business, which may be made easier when the options are quite diverse (e.g., many different strike levels and maturities). Obligors may very efficiently offer structured note holders great flexibility in customizing their risk profiles. Risk management of the options embedded in structured notes may be simplified. Option traders are most concerned about heavily concentrated option exposures, which is not a concern regarding retail structured note investors. By their nature, structured note options are likely to be very diversified.
  • Structured note obligations may be crystallized by objective valuation measures, such as specific, publicly available market values. Careful definition of those critical market values may be required in order to avoid the risk of exposing an obligor to arbitrage by third parties, while enabling investors and an obligor to know precisely the terminal value of their synthetic funds investment.
  • the business of issuing structured notes is a business that can easily be institutionalized. Managing structured note liabilities is very straightforward. Obligors need not pay util fund manager salaries or exorbitant premiums to buy asset management firms. Further, obligors may become the low cost producer in asset management due to lower marketing expense (piggy-back on mutual fund ads), cheaper issuance, lower administrative and accounting fees, smaller transaction costs, etc. An obligor's incremental regulatory overhead may also be less than the regulatory overhead for many mutual funds is substantial.
  • the obligor may make available an application for structuring, pricing, and comparing different structured note to various parties, such as to customers online, and to its brokers. Pricing parameters may be established centrally, taking account for all aspects of each structured note, including, but not limited to cu ⁇ ent market conditions (e.g., yield and volatility curves, and bid/asked spreads), historical information (e.g., volatility for each fund, and covariance versus other funds), the risk in the portfolio (e.g., does the structured note increase or decrease the risk in the portfolio) and transaction costs.
  • cu ⁇ ent market conditions e.g., yield and volatility curves, and bid/asked spreads
  • historical information e.g., volatility for each fund, and covariance versus other funds
  • the risk in the portfolio e.g., does the structured note increase or decrease the risk in the portfolio
  • transaction costs e.g., does the structured note increase or decrease the risk in the portfolio
  • Execution and documentation of structured notes may also be fully electronic. Further, an obligor may also provide an application for showing bids for structured notes that are not cu ⁇ ently redeemable.
  • the obligor is likely to be able to accumulate assets relatively inexpensively. Because obligor's cost structure may be lower, obligor will have the option to offer a higher return on structured notes than any underlying fund.
  • Various other financial service providers such as Me ⁇ ill Lynch and Schwab Investments, have demonstrated the value of offering a broad range of investment vehicles.
  • obligors can offer a broader range of fund products than any fund distributor. Obligors need not seek approval from fund managers in order to reference one of their managed funds in a structured note. Instead of merely earning a distribution premium, obligors will earn the full value provided to investors. Further, mass customization is desirable in many retail settings.
  • FIG. 2 illustrates a process for generating and issuing a structured note according to an embodiment of the invention.
  • manipulation of the terms of a request is performed.
  • a request for one or more structured notes is received.
  • the request is processed, and one or more structured notes are generated at step 230.
  • a unique identifier for each structured note is generated. The identification of the requestor and the unique identifier are stored at step 250.
  • step 260 payment is received for the purchase of the structured note.
  • step 270 the terms of the structured note and the purchase amount are stored.
  • An issuance confirmation is transmitted at step 280.
  • step 285 the unique identifier, the purchaser name, the terms of the structured note and the purchase amount are linked together.
  • step 290 the structured note is issued.
  • step 295 post issuance actions occur. The steps of the process illustrated in Fig. 2 will now be described in greater detail below.
  • step 205 manipulation of the terms of a request is performed.
  • a consumer may be permitted to manipulate one or more terms for a structured note prior to purchase. This manipulation of the terms allows a consumer to customize the structured note to meet the consumers' specific investment needs, Either alone or with the assistance of a broker or other financial advisor, a consumer may use a simulator to manipulate terms of a structured note to determine changes in prices based on various terms, such as by using different combinations of funds, different time frames, different risk exposures, etc.
  • an optimization tool may be provided for use by the broker and/or the consumer.
  • a consumer may provide various information about a desired structured note, such as the funds selected as the basis, the distribution of the funds, the investment goals of the consumer and the time period for the structured note.
  • Another aspect of the present invention is a method to permit potential buyers of structured note, investment advisors and brokers to iterate on different note structures to find the optimal combination of features for the individual investor. Such a method would involve a network of computer devices connected to a central server controlled by the obligor. Software on the access devices and the server would permit users of the system to search among many funds to find those with the characteristics desired by the potential investor.
  • the system would then permit the user to alter characteristics of the returns of the fund, by changing tenns of the note including: amount; te ⁇ n; coupon; early redemption options; 'free exchange' options; leveraging exposures; adding or subtracting exposures to other funds, stocks, indices, etc.; option characteristics, e.g. principal protection, or incremental yield for giving up a portion of the potential upside; etc.
  • the system would be linked to market parameters provided by the obligor, which would permit users to see immediately the impact of each change on various aspects of the note.
  • the obligor would be able to centrally provide the necessary inputs to price each note based on market parameters. For example, a user may determine how much incremental yield would be provided if the note holder forgoes returns in excess of 10%o. This would permit real-time pricing and sale of notes, without the need to involve traders or other risk managers.
  • the system would also permit users to test the newly structured note to review its performance over different historical time frames, in bull markets and bear markets. For example, a user may determine how would a newly structured 3-year note have performed, versus a simple purchase of the underlying fund, during the period 1997- 2000.
  • the system would permit users to compare total returns, including the impact of taxes, at the potential investor's tax rate.
  • the system can also generate tradable note provisions, e.g., pricing and provisions that the obligor considers acceptable.
  • the system would be structured to take inputs from users regarding an individual note and immediately prepare the necessary detailed legal documentation for the customized note. Once the investor chooses to execute the purchase of a structured note, the transaction will automatically be included in the obligor's risk systems, recorded in the obligor's books and records; and, all necessary confirmation and other legal requirements would be executed.
  • a system may include a database with information on funds used as the objective valuation measure in the structured note, past performance of the funds, managements fees, advertising fees, etc.
  • a processor accesses the database and processes selections of options for terms of the structured notes, determining historical returns and pricing.
  • a graphical use interface may be provided to enable a consumer, broker or financial advisor to manipulate the terms of the structured note before purchase a purchaser may call up, historical data to analyze how a particular structured note would have fared in a particular economic environment.
  • a purchaser may call up pricing information such as, but not limited to, the volatility curve and the yield curve, distributed across all structuring intervals.
  • Fig. 6 illustrates a graphical user interface for manipulating terms according to an embodiment of the invention. In the example illustrated in Fig. 6, the manipulation of the terms of the structured note is provided in an internet environment. However, it is understood that the manipulation may occur in other mediums and/or networks as well.
  • Graphical user interface 600 includes a standard menu 605 that enables a user to navigate within the website.
  • Graphical user interface 600 also includes portions to select information about that terms of the structured note. As illustrated in the example of Fig. 6, these portions are in the form of pull down menus. However, it is recognized that other manners of enabling a user to select information about the terms of the structured note may also be used.
  • a user may select the category of the one or more objective valuation measures to be used. Categories may include the specific bond fund, the specific mutual fund, the specific hedge fund, the specific commodity or any other objective valuation measure to be used in connection with the structured note.
  • Portion 615 may enable a user to select the sector of the one or more objective valuation measures to be used.
  • Sectors may include, but is not limited to, the area of the market (e.g., financial services, technology, energy, telecommunications, transportation, etc.) and the goal of the fund chosen (e.g., large capitalization, small capitalization, aggressive, growth and income, etc.).
  • the area of the market e.g., financial services, technology, energy, telecommunications, transportation, etc.
  • the goal of the fund chosen e.g., large capitalization, small capitalization, aggressive, growth and income, etc.
  • Portion 620 enables a user to select a family of funds.
  • Many fund management companies such a mutual funds, offer a number of different funds to consumers.
  • Fidelity Investments provides tens of fund options to consumers.
  • a consumer may select a fund family, and then be presented with options provided by that fund family in portion 625. This may also be used with bond funds, hedge funds, commodity funds, real estate investment trust funds, and other types of objective measures.
  • Portion 630 enables a consumer to determine the weighting of the selected objective valuation measures.
  • a consumer may create a structured note based on more that one objective valuation measure. For example, a consumer could have 75% of the structured note based on a specific mutual fund and 25% on a specific bond fund. Other weightings and objective measure could also be used. If a consumer elects to explore the potential for a structured note based on more than one objective measure, an option may be presented to permit the user to select additional objective valuation measures.
  • the weighting of the structured note may be greater than or less than 100 %, depending upon the selections of the purchaser. By using leverage, taking a short position, taking a long position, etc., a purchaser can alter the investment and the weighting. Use of the structured note obviates the need by obligors to make margin calls related to leveraged or short positions.
  • Portion 635 enables a user to select the time period for the structured note.
  • an obligor may offer a structured note for a particular time period.
  • the obligor may offer superior returns. For example, if a consumer purchases a structured note for a specific time period, e.g., eighteen month, two years, five years, etc., the obligor may offer a better rate of return, e.g., a return of one percent above the selected objective valuation measurement.
  • Portion 640 enables a user to select the valuation history time frame.
  • a user may select any time period, e.g., one year, five years, since the inception of the fund, etc., upon which to evaluate the potential for future expectations. For example, if a user wants to purchase a structured note for five years, it may be desirable to base historical returns on the perfonnance of the underling objective valuation measure for the past five years.
  • Portion 645 displays the historical return based on the selections made by the consumer while portion 650 displays the price of the structured note based on the selection.
  • Fig. 7 illustrates a graphical user interface displaying the output of manipulated terms according to an embodiment of the invention.
  • graphical user interface 700 includes a standard menu 705 that enables a user to navigate within the website.
  • portion 710 displays that the user selected "Mutual Funds.”
  • Portion 715 shows that the user has selected the "Aggressive Growth" sector.
  • Portion 720 displays that the user selected "Fund Management Company
  • portion 725 displays that the user selected "Fund AG.”
  • Portion 730 discloses that the user desires a structured note based 100% on the selected fund.
  • Portion 735 displays that the user selected a two year structured note. Further, the user selected a valuation history of five years as displayed in portion 740.
  • Portion 745 displays the historical return based on the selections made by the consumer while portion 750 displays the price of the structured note based on the selection.
  • the historical return is calculated to be 8.75%o per year while the price is the amount to be paid by the purchaser.
  • purchasing a structured note may be similar to purchasing a conventional bond, where the initial price does not change but the return or the structural changes based on attributes selected do change.
  • investments in a structured note may be "priced" based on a commitment by the purchaser.
  • a purchaser may commit to a periodic investment (e.g., a monthly investment of $100) to purchase the structured note.
  • the purchaser may then be given the structured notes immediately, with the pricing occu ⁇ ing based on the net present value of the future payments.
  • individual structured notes may be purchased at the time a purchaser decides to make the investment,
  • a request for one or more structured notes is received.
  • a request may include one or more terms for the structured note.
  • tenns may include the timing for redeeming the structured note, the amount or amounts of payments to be made, the basis for the valuation of the structured note and the basis for the performance of the structured note.
  • Other terms for a structured note may also be used.
  • the valuation of a structured note may be based on an objective valuation.
  • Objective valuations may include, but are not limited to, a stock price, commodity price, an economic index, a mutual fund, a stock market index, a bond fund, a bond index, an inflation index, a hedge fund, an interest rate, etc.
  • Standard valuations, such as a mutual fund are comprised of a bundle of attributes. Because of its pass-through structure, all investors must be treated the same, i.e. the bundle is not optimal for any investor.
  • a structured note permits characteristics to be unbundled and customized to fit the exact needs of each investor on the basis of the terms of the structured note.
  • the identity of the owner of the structured note may also be considered part of the terms of the structured note.
  • the request for the structure note may come directly from the owner, or may be made by a third party on behalf of the owner. Further, the owner may be an individual investor, a trust for an individual, an entity, or anyone else interested in an investment product.
  • the request is processed. Processing may include reviewing the terms of the request and determining whether the terms are acceptable and appropriate. By way of example, processing may involve the obligor ensuring that the objective valuation measure is appropriate and that the time period for investment is appropriate for the rate of return requested. Other types of processing may also be used.
  • processing may involve the obligor ensuring that the objective valuation measure is appropriate and that the time period for investment is appropriate for the rate of return requested. Other types of processing may also be used.
  • one or more structured notes are generated.
  • a unique identifier for the structured note is generated. According to an embodiment of the invention, each structured note has a co ⁇ esponding unique identification (e.g., numeric, alpha-numeric, etc.) that is unique to that structure note. Other manners of identification may also be used. Thus, for each structured note, an identification is provided.
  • a structured note may be treated in a manner similar to a conventional mutual fund, where the unique identifier acts as an account number.
  • Periodic updates, e.g., monthly, of the valuation of the structured note may be sent to the owner. Further, for marketing purposes, it may be desirable to include the actual return of the objective valuation measure and a contrast with the return of the structured note. Other information may also be included with a periodic update.
  • the identification of the owner of the structured note and the unique identifier are stored at step 250.
  • the identification of the owner and the unique identifier may be stored within a database on a data storage module.
  • the identification of the owner and the unique identifier may also be associated within the database.
  • the database may be accessed to retrieve various information about the structured note, including the owner, the purchaser, the terms of the structured note, and the valuation of the structured note.
  • step 260 payment is received for the purchase of the structured note.
  • Payment may be received by any manner, such as by receipt of cash, check, or wire transfer.
  • the amount of payment for the purchase is based on the objective valuation measure at the time of purchase.
  • the objective valuation measure is based on a particular publicly traded bond mutual fund
  • the purchase is based on the valuation of that particular bond mutual fund on the day of the purchase of the structured note.
  • the terms of the structured note and the purchase amount are stored.
  • the terms of the structured note and the purchase amount may be stored within a database on a data storage module.
  • the identification of the owner and the unique identifier may also be associated within the database.
  • the database may be accessed to retrieve various information about the structured note, including the owner, the purchaser, the terms of the structured note, and the valuation of the structured note.
  • issuance confirmation may include ensuring that a broker and/or purchaser receive a notification of the purchase of the investment.
  • the notification may include a document having information about the structured note purchase, the purchase amount, the name of the purchase and the like.
  • the document may be transmitted via mail, email, fax, or other manner of transmission.
  • the purchaser and/or the broker may be required to approve the purchase.
  • the broker and/or purchaser may be given a certain period of time within which to reject the transaction (e.g., twenty-four hours, within two days of the purchase, etc.).
  • the transaction is considered approved.
  • various electronic tools such as electronic signatures, may be used to for transmission, rejection, and/or approval of the transaction.
  • the unique identifier, the purchaser name, the terms of the structured note and the purchase amount are linked together.
  • the database may be accessed to retrieve various information about the structured note, including the owner, the purchaser, the terms of the structured note, and the valuation of the structured note at any time.
  • Other associations may also be used to enable appropriate information to be retrieved as needed, such as all structured notes associated with one owner, or all the owners of a particular structured note. Other information may also be obtained.
  • the structured note is issued.
  • the issuance of the structured note may take any form, such as an account having periodic updates, a certificate (e.g., akin to a stock certificate) or other manner of issuing.
  • post issuance actions occur.
  • Actions that occur after the issuance of the structured note may include changing objective valuation measurements by the investor, altering the weighting of objective valuation measurements and communicating the status of the structured note.
  • the status of the structured note may comprise the returns to date associated with the structured note, the current value of the structured note, the return of the underlying objective valuation measure, the difference between the value and/or return of the structured note and the underlying objective valuation measure and tax benefits.
  • Communication of the status of the structured note to the owner may be performed in a variety of manners. For example, the status may be communicated via a period statement to the structured note holder via mail, e.g., monthly, quarterly, yearly, etc. The status may also be communicated electronically, such as via email, or via an owner accessing an internet site.
  • Fig. 8 illustrates a graphical user interface displaying a report of the status of a structured note to the owner according to an embodiment of the invention.
  • Graphical user interface 800 includes a standard menu 805 that enables a user to navigate within the website.
  • Portion 810 represents the return of the structured note for the owner.
  • graphical user interface 800 further provides the actual return of the underlying objective valuation measurement in portion 815, the benefit to the structured note holder in portion 820, and the tax benefit to the structured note holder in portion 825.
  • portion 830 displays the information from the past quarter
  • portion 835 displays the information from the past year
  • portion 840 displays the information from the date of the purchase of the structured note. Additional information may also be displayed, such as forecasts for the structured note based on historic or estimated future returns over a given time period.
  • a user may select the appropriate tax bracket for that user.
  • portion 825 may be altered based on the selection in portion 845.
  • portion 845 may provide a drop down menu having a list from which a user can select the appropriate tax bracket.
  • Other manners for selecting the tax burden such as selecting either long term or short term capital gains, may also be used.
  • comparisons between the return of the structured note and the return of the underlying objective valuation measurement and the tax benefits may be provided in a number of manners. An owner may select to have the comparison made in percentage terms or absolute dollar terms.
  • Fig. 3 illustrates a conventional funds-of-funds where the underlying assets are hedge funds according to an embodiment of the invention.
  • a plurality of investors 300 are permitted to invest in the mnd-of-hedge funds 350.
  • Fund-of-funds 350 is managed by a fund manager who manages the plurality of hedge funds 375.
  • a first level of fees are charged by the funds managers managing the individual funds 375.
  • a second level of fees are charged by the funds manager managing the fund-of-funds 350.
  • An alternative, and improved, way to enter the fund-of-funds market is to create a synthetic fund-of-funds according to the present invention.
  • an investment vehicle superior to any institutional fund-of- funds offering on the market is to offer a structured note linked to a specific fund of funds but with a higher return that synthetically will provide a higher total return as a customized fund-of-hedge-funds.
  • Customers then may be able to combine existing hedge funds and/or fund-of-funds to suit their particular needs.
  • a customer may customize a fund of funds by adding or deleting underlying funds.
  • a fund of fund contains underlying funds 1 through 10.
  • a customer may examine various permutations of structured notes, such as a structured note with only underlying funds 1-5 and 7-10, or a structured note with underlying funds 2-10. Other permutations may also be explored before the customer purchases the structured note.
  • Structured notes are hybrid securities, having features that may include: equity, commodities, straight debt instruments, etc., as well as derivative instruments.
  • Interest payments on structured notes can be paid according to returns of various indexes or rates, in this case the perfonnance of the underlying hedge funds in the fund-of-funds composition selected by the investor.
  • the redemption value and final maturity of the note can be affected by the derivatives embedded in the structured note (here again the underlying hedge funds).
  • Fig. 4 illustrates an embodiment of the synthetic fund-of-funds according to an embodiment of the invention.
  • investors 400 would select their own fund-of-funds composition 475.
  • investor A 400 may select fund-of-funds composition 475 comprising hedge fund A, hedge fund C, and hedge fund X.
  • Investor B 400 might select a fund-of-funds composition 475 comprising hedge fund X, hedge fund Y, and hedge fund Z.
  • the synthetic fund-of-funds issuer would issue to investor A 400 a structured note A 450 structured to provide the performance of investor A's selected fund-of-funds 475 composition, whereas investor B 400 is issued a structured note B 450 structured to provide the performance of investor B's selected fund-of-funds composition 475.
  • Fig. 4 illustrates the concept in terms of a fund-of-hedge funds
  • the concept of issuing structured notes as synthetic fund-of- funds could be applied based on underlying assets, long or short, leveraged or not, of nearly any form: hedge funds, mutual funds, individual equities, bonds, commodities, multiple fund-of-funds (the structured note corresponding to a synthetic fund-of-multiple- fund-of-funds) and so forth.
  • the issuer, or obligor issues structured notes that function as a synthetic fund-of-funds providing the investor the performance co ⁇ esponding to the customized fund-of-funds without requiring co ⁇ esponding purchase by the obligor of those identical funds.
  • the obligor may earn fees associated with fund-of-funds while enjoying a reduced risk more commensurate with the broader market by virtue of the diversity and size of the overall asset collection maintained by the obligor. This may be accomplished because the obligor is able to manage the assets differently from the way in which the conventional fund-of-funds manager manages its assets. According to one embodiment of the invention, the obligor offers the performance of a customized fund-of-funds without actually acquiring a direct interest in those underlying funds. Therefore, the obligor does not pay the costs (e.g., performance fees and management fees) associated with the first layer of managers for the individual funds.
  • costs e.g., performance fees and management fees
  • obligor may short the performance of the customized fund-of-funds using structured notes, and separately buy and manage assets different from the underlying assets (e.g., the customized fund-of- funds) sold. While it initially may appear counterintuitive, this intentional asset/liability mismatch may have several benefits. Accordingly, one benefit may be that the obligor would not need to buy an established fund-of-funds company in order to offer a few seasoned performers. Instead, the obligor could offer its customers assets, in the form of the structured notes, matching exactly the perfonnance of any fund of funds for which obligor can obtain data. According to an embodiment of the invention, this is likely to be a richer choice than any other single institution can offer since any single institution is unlikely to be able to invest in every fund-of-funds in existence.
  • obligor may offer its customers the ability to customize their exposures in ways not available elsewhere.
  • Obligor's customers could be permitted to buy the performance of a well regarded fund-of-funds, and then modify the composition by adding and subtracting individual fund exposures, hedge funds, indices, stocks, etc.
  • an investor might select a structured note based on a particular fund of funds, and include a short or long position in specific hedge funds, hi this way, investors can under- or over- weight individual funds or hedge fund strategies.
  • stock positions can be over or under weighted. Because such customization does not require any actual transactions in the underlying assets, such changes conceivably could be made dynamically through time.
  • a further benefit may provide that investors may have the ability not only to customize the content of the synthetic fund, but additionally (or instead) the ability to customize the strategy employed. For example, the investor may favor the prospects of a particular fund-of-funds XYZ, but may be less enthusiastic for the prospects of employing a pairs trading strategy for the foreseeable future. The obligor may offer the performance of the fund-of-funds XYZ as customized to remove pairs trading. [0102] Further, instead of simply earning a small distribution spread as a reseller of funds, obligor may capture the full amount of various layers of fees (e.g., the hedge fund manager's fees, the fund-of-fund manager's fees, etc.).
  • the hedge fund manager's fees e.g., the hedge fund manager's fees, the fund-of-fund manager's fees, etc.
  • management fees may be avoided. This may allow the obligor to receive the various layers of fees or to discount fees for investors.
  • an investor can structure its structured note to place caps on losses/gains. In this manner, note holders would have the ability to shape their risk profile in the way that best suits them. For example, an investor willing to accept a maximum return of 10% over the term of the structured note, would be entitled to an incremental return.
  • An investor with a specific liquidity requirement e.g. college tuition
  • principal protection might choose principal protection with the specific term and amount he needs. While the result of principal protection will be to reduce the return of the structured note, it will substantially increase the investor's certainty.
  • Implementation of the synthetic fund using the present invention may be feasible for a larger financial institution with large balance sheets that may choose to own assets that are different from their liabilities, in this case the structured fund-of-funds notes it sells.
  • Such larger institutions need not simply match assets and liabilities, as may be required by smaller entities such as fund-of-funds groups or mutual fund management companies. Therefore, the structured notes need not match or co ⁇ espond to the assets.
  • the issue of the risk to the issuer of having mismatched assets and liabilities may be dealt with across the aggregate valuation of the structured notes issued by the obligor. With enough investors, and very lightweight controls, the overall returns of the structured notes should closely track the general market for fund-of-funds.
  • the S&P is in the process of establishing a hedge fund index, using 40 funds as a proxy for the 6,000 funds cu ⁇ ently in the market.
  • the New York Times wrote "Standard & Poor's says its statistical research shows that 30 to 40 funds reliably reporting their performance data can accurately represent a much larger universe.” Therefore, whether the right number is 40 or 200, the obligor may assure its structured note exposure represents the general fund-of-funds market, without undue concentration to particular names that might substantially exceed average returns.
  • the obligor may choose to invest structured note proceeds (e.g., the moneys paid by the investors to acquire structured notes co ⁇ esponding to their customized fund-of-funds) in funds that mimic or simulate the exposures of the structured notes.
  • This strategy would be very successful if obligor asset managers continued to beat the market. If the obligor managers just matched market performance, obligor may still earn the full fees.
  • the obligor is a sufficiently large company, such as a large financial institution, the obligor may use its wholesale buying power to gain access to the most attractive funds and to negotiate reduced fees.
  • Offering of a synthetic fund may provide good returns to an obligor.
  • Structured notes may also provide a wonderful opportunity to provide customers access to a rich a ⁇ ay of premium products, while at the same time allowing obligors to retain much or all of the management fees. With only one level of distribution, obligors may offer the performance of prominent fund-of-funds at discounted fees.
  • structured notes As general structured notes are already well understood and accepted by investors, such structured notes of the present invention should not be resisted by the investment community. In addition to being well understood, structured notes may provide some benefits not available in the more ordinary fund-of-funds investments.
  • structured notes may permit additional flexibility in offering investors customized risk/rewards structures. Since there is no commodity market for such offerings, and no cu ⁇ ent price competition, this too could be an attractive business.
  • an obligor could offer exposures to every public mutual fund, as well as every listed security, index, commodity price, etc. Investors could combine a number of different equity exposures in a single structured note, or have a series of structured notes. Investors may choose to leverage their equity exposure up to a maximum established by the obligor. In a single structured note, an investor could choose to take long exposures to some funds, and short the performance of other funds.
  • Tax consequences of gains recognized by mutual funds are passed through to shareholders. Shareholders in mutual funds generally have little notion of their potential tax liability connected with unrealized fund gains. In addition, the timing of tax liabilities is completely unpredictable. Fund realization of taxable gains can inflict substantial, uneven and inequitable penalties on different shareholders. An investor who held a fund for a short time during which the manager chose to realize large gains may still be liable for the tax consequences.
  • Structured notes will be capital assets. Unlike mutual funds, there will be no pass-through of tax liabilities. Note holders will not face unpredictable tax consequences. However, structured note holders will incur ordinary income for structured note coupons (e.g., direct or OID), and coupon income may exceed dividend income from the underlying stock positions.
  • structured note coupons e.g., direct or OID
  • Mutual funds offer every investor the same liquidity. Issuers of structured notes can offer different liquidity provisions to each investor, at prices that reflect the economic value of the liquidity. Investors could select different redemptions/call/term options, e.g., a fixed term note, redeemable after one year, once a week, at various redemption discounts, callable at a premium, extension options, either by the obligor or the investor, etc. Obligors might be happy to offer investors with a three-year investment horizon higher returns than offered to short-term investors.
  • Structured note holders may also individually choose the manner by which they want to take their structured note returns. Some will choose to maximize potential long-term capital gains. Others may seek periodic fixed, or variable (e.g., linked to short- term interest rates, or capital gains) payments.
  • the structure of structured note cash flow can be extremely flexible.
  • the structured note links to the performance of the Fidelity Magellan Fund, with a principal amount of $20,000.
  • the structured note closes on December 15, 2002, and the final note payment occurs on the earliest of: (i) three years from the date of closing; (ii) five days following early redemption by the investor; or (iii) five days after the selected mutual fund ceases to be a mutual fund.
  • the structured note pays two percent semi- annually, paid on a 30/360 basis.
  • the obligor will pay the amount that will provide the investor a yield equal to the greater of: (i) 50 basis points more than the yield of the selected mutual fund; or (ii) 105% of the yield of the selected mutual fund, which in this example is the Fidelity Magellan Fund (cu ⁇ ently closed to new investors). Early Redemption is permitted on the first date following receipt by the obligor of effective written notice by the investor, after the first anniversary of the closing.
  • the semi-annual intemal-rate-of-return is calculated: (i) for the selected mutual fund — taking account for all cash flows the investor would have received had he or she made an investment of the principal amount in the selected mutual fund during the term of the structured note, and received the final NAV on the final payment date; (ii) for the structured note — taking account for all coupons received during the term of the structured note, and the amount paid on the final structured note payment date.
  • the final NAV is the arithmetic average of the last four reported NAV calculations, prior to the final structured note payment date.
  • the structured note links to the Fidelity Magellan Fund, with a principal amount of $20,000 and a closing date of December 15, 2002.
  • the final structured note payment date is December 15, 2005.
  • the obligor will pay the amount that will provide the investor with a yield equal to the greater of: (i) 20 basis points less than the yield of the selected mutual fund; or (ii) the protected principal amount, where the protected principal amount is $18,000.
  • the mutual fund is any actively managed, publicly traded, open-ended mutual fund, which in this case is the Fidelity Magellan Fund (cu ⁇ ently closed to new investors).
  • the yield is the semi-annual internal-rate-of-return calculated: (i) for the selected mutual fund — taking account for all cash flows the investor would have received had he made an investment of the principal amount in the selected mutual fund during the term of the structured note, and received the final NAV on the final payment date; (ii) for the structured note— taking account for all coupons received during the term of the structured note, and the amount paid on the final structured note payment date.
  • the final NAV is the arithmetic average of the last four reported NAV calculations, prior to the final structured note payment date.
  • the principal amount is $20,000.
  • the closing date is December 15, 2002, and the final note payment date is December 15, 2005.
  • the obligor will pay the amount that will provide investor a yield equal to: (i) 40 basis points more than the yield of the selected mutual fund; but, (ii) not less than the protected principal amount, where the protected principal amount is $18,000; and (iii) not more than $23,000.
  • the semiannual internal-rate-of-return is calculated: (i) for the selected mutual fund — taking account for all cash flows the investor would have received had he made an investment of the principal amount in the selected mutual fund during the term of the structured note, and received the final NAV on the final payment date; (ii) for the structured note — taking account for all coupons received during the term of the structured note, and the amount paid on the final structured note payment date.
  • the final NAV is the arithmetic average of the last four reported NAV calculations, prior to the final structured note payment date.
  • Fig. 5 illustrates a system 500 according to an embodiment of the present invention.
  • the system 500 comprises a plurality of computer devices 505 (or "computers") used by a plurality of users to connect to a network 502 through a plurality of connection providers (CPs) 510.
  • the network 502 may be any network that permits multiple computers to connect and interact.
  • the network 502 may be comprised of a dedicated line to connect the plurality of the users, such as the Internet, an intranet, a local area network (LAN), a wide area network (WAN), a wireless network, or other type of network.
  • Each of the CPs 510 may be a provider that connects the users to the network 502.
  • the CP 510 may be an Internet service provider (ISP), a dial-up access means, such as a modem, or other manner of connecting to the network 502.
  • ISP Internet service provider
  • a dial-up access means such as a modem
  • the discussion will presume four computer devices 505a-505d are connected to the network 502 through two CPs 510.
  • Fig. 5 shows the three computer devices 505a-505d, each having a connection to the network 502 through the CP 510a and the CP 510b.
  • the computer devices 505a-505d may each make use of a personal computer such as a computer located in a user's home, or may use other devices which allow the user to access and interact with others on the network 502.
  • a central controller module 512 may also have a connection to the network 502 as described above.
  • the central controller module 512 may communicate with one or more modules, such as one or more data storage modules 514, one or more processor modules 516, or other modules.
  • Each of the computer devices 505a-505d used may contain a processor module 504, a display module 508, and a user interface module 506.
  • Each of the computer devices 505a-505d may have at least one user interface module 506 for interacting and controlling the computer.
  • the user interface module 506 may be comprised of one or more of a keyboard, a joystick, a touchpad, a mouse, a scanner or any similar device or combination of devices.
  • Each of the computers 505a-505d may also include a display module 508, such as a CRT display or other device.
  • a developer, a user of a production system, and/or a change management module may use a computer device 505.
  • the central controller module 512 may maintain a connection to the network 502 such as through a transmitter module 520 and a receiver module 518.
  • the transmitter module 520 and the receiver module 518 may be comprised of conventional devices that enable the central controller module 512 to interact with the network 502.
  • the transmitter module 520 and the receiver module 518 may be integral with the central controller module 512.
  • the transmitter module 520 and the receiver module 518 may be portions of one connection device.
  • the connection to the network 502 by the central controller module 512 and the computer devices 505 may be a high speed, large bandwidth connection, such as through a Tl or a T3 line, a cable connection, a telephone line connection, a DSL connection, or another similar type of connection.
  • the central controller module 512 functions to permit the computer devices 505a-505c to interact with each other in connection with various applications, messaging services and other services which may be provided through the system 500.
  • the central controller module 512 preferably comprises either a single server computer or a plurality of server computers configured to appear to the computer devices 505a-505d as a single resource.
  • the central controller module 512 communicates with a number of modules. Each module will now be described in greater detail.
  • a processor module 516 may be responsible for carrying out processing within the system 500.
  • the processor module 518 may handle high-level processing, and may comprise a math co-processor or other processing devices.
  • Data may be stored in a data storage module 514.
  • the data storage module 514 stores a plurality of digital files.
  • a plurality of data storage modules 514 may be used and located on one or more data storage devices, where the data storage devices are combined or separate from the controller module 512.
  • One or more data storage modules 514 may also be used to archive information.
  • Issue module 522 may issue structured notes and/or synthetic funds.
  • Issuing may include forwarding a certificate and/or statement related to the structured note to the owner.
  • a statement may be provided on a periodic basis, e.g., monthly, quarterly, etc.
  • Statements may be provided electronically, such as via email or by providing a secure internet site for an owner of the structured note to access information.
  • issue module 522 may include, or have access to, equipment necessary to print out a statement.
  • system 500 of Fig. 5 discloses the requester device 505 connected to the network 502, it should be understood that a personal digital assistant ("PDA"), a mobile telephone, a television, or another device that permits access to the network 502 may be used to a ⁇ ive at the system of the present invention. It is understood that, while system 500 is represented in Fig. 5 as a network based system, other systems may also be used, with applicable modules resident therein. Other systems may also be used.
  • PDA personal digital assistant
  • the systems and processes described in this invention may be implemented on any general purpose computational device, either as a standalone application or applications, or even across several general purpose computational devices connected over a network and as a group operating in a client-server mode.
  • a computer- usable and writeable medium having a plurality of computer readable program code stored therein may be provided for practicing the process of the present invention.
  • the process and system of the present invention may be implemented within a variety of operating systems, such as a Windows® operating system, various versions of a Unix- based operating system (e.g., a Hewlett Packard, a Red Hat, or a Linux version of a Unix- based operating system), or various versions of an AS/400-based operating system.
  • the computer-usable and writeable medium may be comprised of a CD ROM, a floppy disk, a hard disk, or any other computer-usable medium.
  • One or more of the components of the system or systems embodying the present invention may comprise computer readable program code in the form of functional instructions stored in the computer-usable medium such that when the computer-usable medium is installed on the system or systems, those components cause the system to perform the functions described.
  • the computer readable program code for the present invention may also be bundled with other computer readable program software. Also, only some of the components may be provided in computer-readable code.
  • various entities and combinations of entities may employ a computer to implement the components performing the above-described functions.
  • the computer may be a standard computer comprising an input device, an output device, a processor device, and a data storage device.
  • various components may be computers in different departments within the same corporation or entity. Other computer configurations may also be used.
  • various components may be separate entities such as corporations or limited liability companies. Other embodiments, in compliance with applicable laws and regulations, may also be used.
  • the system may comprise components of a software system.
  • the system may operate on a network and may be connected to other systems sharing a common database.
  • Other hardware a ⁇ angements may also be provided.
  • One possible educational/advertising network for synthetic funds is a consortium of banks, or other financial institutions interested in issuing structured notes. From a distribution perspective issuers ' of structured notes, independent investment advisors, and other like minded parties could be organized to jointly develop and leverage educational materials, marketing, marketing collateral and advertising. Such groups could establish rules and standards that would inspire investor confidence, share the cost of advertising and promotions, share the costs of consumer education, etc. [0145] Other embodiments, uses and advantages of the present invention will be apparent to those skilled in the art from consideration of the specification and practice of the invention disclosed herein. The specification and examples should be considered exemplary only. The intended scope of the invention is only limited by the claims appended hereto.

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Abstract

Cette invention se rapporte à des fonds synthétiques prévus pour être achetés par des investisseurs. A cet effet, un titre obligataire structuré est structuré pour fournir un rendement/une exposition du capital-action personnalisés. Les termes de chaque titre obligataire structuré peuvent être spécifiés par l'acheteur et les titres obligataires structurés peuvent être constitués par des obligations non garanties du débiteur obligataire, c'est-à-dire que le titre obligataire structuré n'est basé sur aucun actif sous-jacent. Ainsi, il n'y a pas de limite à l'utilisation du produit des titres obligataires structurés et la gestion des actifs et des obligations est entièrement laissée à la discrétion du débiteur obligataire. Les obligations de paiement des titres obligataires structurés peuvent être mises en relation avec les performances de la valeur des objectifs, mais les détenteurs des titres obligataires structurés vont dépendre du bon crédit du débiteur obligataire pour leur paiement.
EP03766831A 2002-08-01 2003-07-01 Fonds synthetiques avec titres obligataires structures Ceased EP1543458A4 (fr)

Applications Claiming Priority (5)

Application Number Priority Date Filing Date Title
US39972602P 2002-08-01 2002-08-01
US399726P 2002-08-01
US40004202P 2002-08-02 2002-08-02
US400042P 2002-08-02
PCT/US2003/020611 WO2004013793A1 (fr) 2002-08-01 2003-07-01 Fonds synthetiques avec titres obligataires structures

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EP1543458A1 true EP1543458A1 (fr) 2005-06-22
EP1543458A4 EP1543458A4 (fr) 2006-09-13

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EP03766831A Ceased EP1543458A4 (fr) 2002-08-01 2003-07-01 Fonds synthetiques avec titres obligataires structures

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EP (1) EP1543458A4 (fr)
JP (1) JP2005535033A (fr)
AU (1) AU2003247845B2 (fr)
CA (1) CA2494113C (fr)
WO (1) WO2004013793A1 (fr)

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DE10335365A1 (de) * 2003-08-01 2005-02-24 Irwin Industrial Tools Gmbh Schrittgetriebe mit kleiner Schrittweite
DE10335353B4 (de) * 2003-08-01 2007-03-01 Irwin Industrial Tools Gmbh Schrittgetriebe mit großer Schrittweite
WO2004081723A2 (fr) 2003-03-07 2004-09-23 Weiss Allan N Titres a indice commun
US8082202B2 (en) 2003-03-07 2011-12-20 Market Shield Capital, Llc Market-indexed mortgage system and method
US8468079B2 (en) 2003-03-07 2013-06-18 Market Shield Capital, Llc Index-based liquidity system and method
US8346654B2 (en) 2003-03-07 2013-01-01 Market Shield Capital, Llc Indexed payment stream system and method
US8438100B2 (en) 2009-12-10 2013-05-07 Blackrock Fund Advisors Investment funds enabling a bond laddering strategy
JP6932071B2 (ja) * 2017-11-30 2021-09-08 株式会社日立国際電気 仕組債に関する営業支援システム
JP7051964B1 (ja) * 2020-09-25 2022-04-11 クレディ・スイス証券株式会社 情報処理装置、情報処理方法及びプログラム

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US5742775A (en) * 1995-01-18 1998-04-21 King; Douglas L. Method and apparatus of creating financial instrument and administering an adjustable rate loan system
EP0978074A2 (fr) * 1996-04-12 2000-02-09 Citibank, N.A. Devises virtuelles synthetiques
US6321212B1 (en) * 1999-07-21 2001-11-20 Longitude, Inc. Financial products having a demand-based, adjustable return, and trading exchange therefor

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See also references of WO2004013793A1 *

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CA2494113A1 (fr) 2004-02-12
AU2003247845B2 (en) 2009-12-10
WO2004013793A1 (fr) 2004-02-12
JP2005535033A (ja) 2005-11-17
CA2494113C (fr) 2013-12-03
EP1543458A4 (fr) 2006-09-13
AU2003247845A1 (en) 2004-02-23

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