HFR Asset Management and Dresdner Kleinwort Wasserstein (DrKW) have launched the latest in a series of index-linked structured products.
The new investment vehicle, termed the "Himalaya" to reflect its chart, is a five year capital guaranteed product which will return the principal sum invested plus 95% or 150% of the average growth of eight HFRX Strategy Indices, with the value of the best performing strategy index being "locked in" for each of five successive years. At the end of the first year, the value of the best performing strategy index will then be eliminated with the process repeated for each subsequent year over a period of the next three years. At maturity the value of the four remaining strategies will be set.
Gabriel Segredo, Director in the Alternative Investments Group at DrKW, said: "This is a first for investors since it applies the popular Himalaya structure previously seen with Equity Indices to the hedge fund asset class."
Dresdner Kleinwort Wasserstein has structured the new Himalaya - effectively Euro Medium Term Notes with 100% capital protection at maturity linked to the HFRX family of indices - and is acting as issuer for the product.
Marketing of the notes starts this month to investors across Europe. The notes are available in US Dollar and Euro denominations.
John Godden, Managing Director of HFR Europe, said: "The HFRX Himalaya has been designed to enhance the leverage and performance of hedge fund index investing. It allows investors to get the best out of the HFRX indices with complete protection for their initial capital outlay. "
The introduction of the Himalaya follows a year of rapid adoption of the HFRX Index and the roll-out of a broad range of products based on the HFRX Global index and eight underlying sub-strategy indices. Since its inception in April 2003, HFRX has become the most widely used and fastest growing hedge fund index employing an asset weighted, rules-based process to closely reflect the global hedge fund industry.
Background Note: The typical characteristic of a "Himalaya" product is that it locks in the value of the best performing strategy index over each successive year of the product term. At the end of the first year, the value of the best performing strategy index is eliminated with the process repeated for each subsequent year over a given period.
The HRFX Himalaya is dependent on a total pool investment size of not less than EUR 10m or USD 12m. The 150% participation is only achievable in the US Dollar version of the product; a figure of 95% applies for the Euro denominated version. This is due to current difference in the 5 year Euro versus Dollar swap rate. All participations are subject to market rates on the issue date.
The HFRX Himalaya is linked the following eight HFRX Sub Indices: the HFRX Convertible Arbitrage Index; HFRX US Distressed Securities Index; HFRX US Equity Hedge Index; HFRX US Equity Market Neutral Index; HFRX US Event Driven Index; HFRX US Macro Index; HFRX US Merger Arbitrage Index ; HFRX US Relative Value Arbitrage Index.
DrKW is a brand name for issuer purposes of the HFRX Himalaya certificates which have been structured as Euro Medium Term Notes. Capital protection at maturity for this product is guaranteed by the legal entity Dresdner Bank AG (rated A1/A).