Bear Stearns has structured a commodity index-linked note with principal protection, participation in the growth of the index and an income coupon.
While most commodity index-linked notes offer leveraged exposure to the index upside, the note sacrifices the participation boost for 100% principal protection and a 1.3% coupon paid biannually. Any percent increase in the index--the Dow Jones-AIG Commodity Index--is matched one-for-one in the final payout after five years. Officials at Bear Stearns could not be reached by press time.
A rival structured salesman noted the five-year term allows for protection and more participation in the index, but it has been designed for investors that would like the extra guarantee of a coupon so the leverage has been cut to provide this. Structured investments combining coupons and growth have been somewhat popular in the U.K., but are not so common in the U.S.
According to Securities and Exchange Commission filings, the firm is selling USD8.06 million of the notes, with an option to upsize the offering. The minimum investment is USD1,000.
