TradingLab, a Milan-based subsidiary of UniCredito Italiano, has started marketing a novel capital-guaranteed structured product to private asset managers. The instrument is based on equity correlation around a basket of 20 stocks, explained Lucas Newbill, market manager for the U.K. These will be blue-chip corporates from the U.S., Europe and Asia. Newbill explained TradingLab created the product in response to clients' growing appetite for correlation structures.
In the trade, the investor would receive an annual coupon of 10% if all 20 stocks remain above a predetermined barrier, likely to be around 60% of the initial value. The unique feature of the bond is a 'memory function'. If, for example, in the first year the investor does not receive a coupon, but in the second year all 20 stocks appreciate and remain above the barrier level, the investor recoups the coupon from the previous year.
