UBS has launched best-of, option-linked, constant proportion portfolio insurance structures in Asia which offer upside on global indices with capital protection. "We've taken the target redemption concept on stocks or indices and replaced it with CPPI," said Patricia Lau, in the equity risk management group in Hong Kong.
In what is seen as a new wrinkle for the popular CPPI concept, the structure can offer exposure on two global indices, such as Eurostoxx 50 versus the Nikkei 225. After a high guaranteed coupon provided in the first year, if the best performing index then rises above a set level, such as 10.5% above the initial spot price, the structure would be knocked out and the investor would receive a 50% participation rate in the return. Typical maturity is five years. Lau explained clients are attracted to the best-of feature, rather than the more common worst-of products in the region, plus the capital protection afforded by CPPI.
