KBC Financial Products plans to offer guaranteed funds on baskets of hedge funds to retail customers after the summer. Thomas Korossy, head of derivatives in New York, said in May it started offering options on baskets of hedge funds to institutional investors and is passing the final hurdles to offer similar options--structured as funds--to retail customers.
KBC is launching the funds because customers are asking for products which are not correlated to the falling equity market, Korossy explained. They will be sold through the KBC Group to its retail clients. He added the department also sells options to other fund providers.
The bank will structure the options on its own hedge funds and third party hedge funds. Korossy said it has been working with fund of fund managers to structure baskets which are diverse and have returns with volatilities around 3-5%. A typical basket will contain 15-20 funds.
Korossy predicted a typical option will have a notional size of USD50 million and the bank's book for these products will grow to USD1-2 billion over the next 12 months.
