Dresdner Kleinwort Wasserstein is rolling out its novel equity volatility notes in the U.S. The first structures, referencing Euro STOXX 50 volatility, were sold to institutional clients in Europe (DW, 3/10). According to a term sheet obtained by DW, the structure has been tweaked for U.S. investors to reference the Standard & Poor's 500, and plays on the spread between implied and realized volatility on the index. Sales officials at the German firm declined comment on the type of investor it is targeting and on how much it has sold.
Similar to the European version, the notes are structured using constant proportion portfolio insurance to provide full capital protection at maturity. The marketing material states Dresdner anticipates an annual return around 9%. Dubbed DEVA--DrKW's Equity Volatility Arbitrage--it is being pitched to investors in the form of three-year U.S. dollar notes.
