Multi-asset participation structured note and swap combination

• US 20050114250A1
• Filed: 11/12/2004
• Published: 05/26/2005
• Est. Priority Date: 03/25/1999
• Status: Active Grant

• Current Assignee: Alpha Financial Technologies LLC
• Original Assignee: Alpha Financial Technologies LLC
• Inventors: Sperandeo, Victor
• Granted Patent: US 7,848,985 B2
• Time in Patent Office: Days
• US Class Current: 705/36.R
• CPC Class Codes: G06Q 20/102 Bill distribution or payments
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• CPC Class Codes: G06Q 40/02 Banking, e.g. interest calculation or account maintenance credit or loans G06Q40/03
• CPC Class Codes: G06Q 40/04 Trading; Exchange, e.g. stocks, commodities, derivatives or currency exchange
• CPC Class Codes: G06Q 40/06 Asset management; Financial planning or analysis

Abstract

A unitary investment instrument combining a swap and a structured note, both of which provide multiple utilization of capital. The unitary instrument has three performance components. An investor invests in the issuer the principal amount of the structured note component. The structured note provides its own portfolio exposures as well as serving as collateral for the base benchmark portfolio swap (alternatively, the base benchmark portfolio exposure can be acquired through a separate collateral deposit on the investor'"'"'s own portfolio). The first component is a benchmark portfolio, which in one preferred embodiment is a financial or stock index such as the S&P 500 Stock Index. The second component is an incremental benchmark portfolio keyed to the same benchmark index and the third component is keyed to a passive commodity index, having long and short positions, which in one preferred embodiment is the Mount Lucas Management Commodity Index. The instrument'"'"'s passive commodity index exposure is established as the product of a leverage factor and the amount of the benchmark portfolio exposure; thereafter this exposure may be the product of (1) a leverage factor and/or (2) the change in value of the overall investment, the benchmark component and/or the commodity index component. The basic return to the investor comprises the change in value of the benchmark, the incremental benchmark and the passive commodity index exposure over a predetermined period of time. The structured note component of the investment instrument includes a guarantee of the return of the investment principal; the swap does not do so, but rather reflects the full risk of the benchmark portfolio exposure. However, research indicates that the unitary swap/structured note instrument has an unusually high probability of outperforming the benchmark index across a wide range of market cycles.

Claims

1-15. -15. (canceled)

16. An investment comprising:

a benchmark performance portfolio having a benchmark portfolio exposure; and

a commodity index portfolio, of long and short positions, having a commodity index portfolio exposure equal to the benchmark portfolio exposure multiplied by a leverage factor of at least 100%, which together reduce the risk while increasing the return of the investment.

17. The investment as recited in claim 16, further comprising an incremental benchmark portfolio having an incremental benchmark portfolio exposure.

18. The investment as recited in claim 17, wherein the incremental benchmark portfolio exposure is less than or equal to 20% of the benchmark portfolio exposure.

19. The investment as recited in claim 17, wherein the incremental benchmark portfolio exposure is less than or equal to 50% of the benchmark portfolio exposure.

20. The investment as recited in claim 16, further comprising a return comprising a change in value of the benchmark performance portfolio and the commodity index portfolio over a predetermined time period.

21. The investment as recited in claim 16, further comprising an investment principal that is invested in the commodity index portfolio and serves as collateral for the benchmark performance portfolio.

22. The investment as recited in claim 21, wherein the investment principal invested is returned to an investor by an issuer at the end of a predetermined time period.

23. The investment as recited in claim 21, wherein the investment principal comprises stocks, bonds, T-bills, cash, currencies, mortgages, any other security, or a combination thereof.

24. The investment as recited in claim 16, wherein the commodity index portfolio exposure is releveraged to an amount which is a function of the commodity index portfolio exposure and a second leverage factor.

25. The investment as recited in claim 16, wherein the benchmark portfolio is keyed to an equity index.

26. The investment as recited in claim 25, wherein the equity index comprises the S&

P 500 Stock Index.

27. The investment as recited in claim 16, wherein the commodity index portfolio is keyed to the S&

P Diversified Trends Indicator.

28. The investment as recited in claim 16, wherein the leverage factor is a function of the performance of the commodity index portfolio over a selected period of time.

29. The investment as recited in claim 28, wherein the leverage factor is a first predetermined number if the commodity index portfolio has had a specified return over the selected period of time and is a second predetermined number if the commodity index portfolio has not had the specified return over the selected period of time.

30. The investment as recited in claim 29, wherein the first predetermined number is at least 100% and the second predetermined number is greater than the first predetermined number.

31. The investment as recited in claim 16, wherein the leverage factor is at least 50%.

32. The investment as recited in claim 16, wherein the leverage factor is less than or equal to 300%.

33. A computer adapted to manage the investment of claim 16.

34. An investment comprising:

a benchmark performance portfolio having a benchmark portfolio exposure;

an incremental benchmark portfolio having an incremental benchmark portfolio exposure less than or equal to 50% of the benchmark portfolio exposure;

a commodity index portfolio, of long and short positions, having a commodity index portfolio exposure equal to the benchmark portfolio exposure multiplied by a leverage factor of at least 100%, which together reduce the risk while increasing the return of the investment;

an investment principal that is invested in the commodity index portfolio, serves as collateral for the benchmark performance portfolio and is returned to an investor by an issuer at the end of a predetermined time period; and

a return comprising a change in value of the benchmark performance portfolio and the commodity index portfolio over the predetermined time period.

35. The investment as recited in claim 34, wherein the investment principal comprises stocks, bonds, T-bills, cash, currencies, mortgages, any other security, or a combination thereof.

36. The investment as recited in claim 34, wherein the commodity index portfolio exposure is releveraged to an amount which is a function of the commodity index portfolio exposure and a second leverage factor.

37. The investment as recited in claim 34, wherein the benchmark portfolio is keyed to an equity index.

38. The investment as recited in claim 37, wherein the equity index comprises the S&

P 500 Stock Index.

39. The investment as recited in claim 34, wherein the commodity index portfolio is keyed to the S&

P Diversified Trends Indicator.

40. The investment as recited in claim 34, wherein the leverage factor is a function of the performance of the commodity index portfolio over a selected period of time.

41. The investment as recited in claim 40, wherein the leverage factor is a first predetermined number if the commodity index portfolio has had a specified return over the selected period of time and is a second predetermined number if the commodity index portfolio has not had the specified return over the selected period of time.

42. The investment as recited in claim 41, wherein the first predetermined number is at least 100% and the second predetermined number is greater than the first predetermined number.

43. The investment as recited in claim 34, wherein the leverage factor is at least 50%.

44. The investment as recited in claim 34, wherein the leverage factor is less than or equal to 300%.

45. A computer adapted to manage the investment of claim 34.

46. An investment comprising:

a first investment having a first exposure; and

a second investment that is not correlated to the first investment and has a second exposure equal to the first exposure multiplied by a leverage factor of at least 100%, which together reduce the risk while increasing the return of the investment.