KBC Asset Management has entered an equity swap to guarantee a new product, and it plans to enter a similar swap this week. The three-and-a-half-year maturity fund, dubbed KBC EquiPlus, is split into three equal periods. Investors receive a 0.5% coupon for each of the 20 stocks that end the period above the initial level of the fund, said Lode Roose, product development manager in Brussels.
In the swap KBC receives the pay out of the fund and pays a Euribor-based rate, according to Roose. It pays Euribor because that is the rate it earns by putting investors' capital on deposit. He estimated each fund would raise around EUR30 million (USD27 million).
Roose said the asset manager decided to launch this product because it combines a defensive structure with short maturities, which is something its clients have demanded. Investors are guaranteed to get their investment back at maturity and Roose said it is unlikely that all the stocks will be lower on all three occasions.
The asset manager chooses derivatives counterparties according to an internal rating, which looks at pricing, risk monitoring, administration and service.
