KBC Asset Management is offering funds with a look-back feature to ensure investors get the lowest entry point into an equity index. In the past few months it has structured several funds linked to the Euro STOXX 50 and the Dutch AEX index and KBC structurers are now looking to price a similar structure on a basket of equity sectors.
The funds are typically five-year static funds. Monthly observations are taken over the first two and a half years and a typical payout has been 110% participation in the upside of the end index value minus the lowest index point on one of the monthly observation dates.
Lode Roose, product developer in Brussels, said the funds have been designed to appeal to private banking clients that are are looking to ensure a low entry point in the underlying. "There's the belief that markets will continue to perform, but there's some concern over the short term," he explained. The funds are Belgian regulated. Roose noted although it would be possible to structure the investment in note form, Belgian investors are drawn to the fund format. A typical size for such an issue has been around EUR20 million. The funds are hedged with external counterparties and KBC shops each month for the best price. Roose noted the firms offering best prices for exotic options are often different from one time to another, "We cannot say that there's one best."
