Deutsche Bank is structuring a hybrid note that gives investors exposure to commodities, equities and fixed income, but not all at the same time. The firm will switch all the capital between the asset classes depending on which is the best performing, according to Geert Bossuyt, head of internal sales for global equity derivatives in London.
Bossuyt said this product is possible now because of the increase in liquidity in the commodity market. The firm needs to be able to switch millions of dollars between the assets instantly.
Some hybrid notes are structured with rainbow options, which alter the weights of asset classes in a portfolio at maturity. This effectively gives investors the benefit of hindsight, but still means they have a diverse portfolio. For example, BNP Paribas is structuring several notes that give investors varying degrees of exposure to commodities, fixed income and equities and was structured with a rainbow option, according to Lars Sjumarken, senior marketer in London.
