Unitary investment having interrelated assets

• US 6,856,971 B1
• Filed: 03/12/1999
• Issued: 02/15/2005
• Est. Priority Date: 03/12/1999
• Status: Expired due to Term

• Current Assignee: Alpha Financial Technologies LLC
• Original Assignee: Alpha Financial Technologies LLC
• Inventors: Sperandeo, Victor H.
• Primary Examiner(s): Millin, Vincent
• Assistant Examiner(s): BERGIN, JAMES S
• Application Number:
  US09/267,186
• Time in Patent Office: 2,167 Days
• Field of Search: 705/36, 705/37, 705/35
• US Class Current: 705/36.00R
• CPC Class Codes: G06Q 40/00 Finance; Insurance; Tax strategies; Processing of corporate or income taxes
• 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 that may be either a swap or a note instrument, both of which provide multiple utilization of capital. The unitary instrument has two performance components. An investor must either deposit collateral with the issuer (in the case of the swap instrument) or invest in the issuer the principal amount of the investment (in the case of the note instrument). The first component is a base portfolio, which is preferably the S&P 500 Stock Index. The second component is keyed to a passive commodity index, having long and short positions, which is preferably the Mount Lucas Management Commodity Index. The instruments'"'"' commodity index exposure is established as the product of a leverage factor and the amount of the base portfolio exposure; thereafter this exposure may be the product of (1) a leverage factor and/or (2) the change in value of the investment or either component thereof. The return to the investor comprises the change in value of both the base portfolio exposure and the passive commodity index exposure over a predetermined period of time. When configured as a note, the investment instrument includes a guarantee of the return of the investment principal, but includes a payout factor, less than one, reducing the amount of the change in the base portfolio and commodity-index portfolio exposure reflected in the value of the note and reflecting the opportunity costs of the guaranteed payback.

Claims

1. A unitary note investment, comprising:

a principal amount invested in said unitary note investment by an investor;

a predetermined maturity date for said unitary note investment, wherein said predetermined maturity date defines a time period;

a performance portfolio for determining a return to said investor on said unitary note investment, said performance portfolio, at the initiation of said time period, comprising,

(a) a base portfolio having an exposure in an amount equal to said principal amount,

(b) a commodity index portfolio, of long and short positions, in an amount equal to a first product comprising said base portfolio exposure amount multiplied by a leverage factor of at least 100%, wherein said first product defines a commodity index portfolio exposure that reduces the risk while increasing the return of said performance portfolio and said commodity index portfolio is not correlated with said base portfolio; and

said return comprising a second product comprising (1) a sum of a change in value of said base portfolio exposure and said commodity index portfolio exposure over said time period multiplied by (2) a payout factor.

2. A unitary note investment as recited in claim 1 wherein said payout factor is less than one.

3. A unitary note investment as recited in claim 1 further comprising:

a rebalanced base portfolio exposure to replace said initial base portfolio exposure, and

a releveraged commodity index portfolio exposure, of long and short positions, to replace said initial commodity index portfolio exposure.

4. A unitary note investment as recited in claim 1 wherein said base portfolio is linked to an equity index.

5. A unitary note investment as recited in claim 4 wherein said equity index comprises the S&

P 500 Stock Index.

6. A unitary note investment as recited in claim 1 wherein said leverage factor is a function of a performance of said commodity index portfolio over a selected period of time.

7. A unitary note investment as recited in claim 1 wherein said passive commodity index portfolio includes bonds and currencies.

8. A method utilizing a unitary note investment, comprising the steps of:

receiving a principal amount by an issuer of said unitary note investment from an investor;

establishing a predetermined period of time for said unitary note investment; and

selecting a performance portfolio for determining a return to said investor for said unitary note investment, wherein said performance portfolio, at the initiation of said predetermined time period, comprising;

(a) a base portfolio having a selected exposure amount;

(b) a commodity index portfolio, of long and short positions, in an amount equal to a product of said base portfolio exposure amount and a leverage factor of at least 100%, wherein said product defines a commodity index portfolio exposure that reduces the risk while increasing the return of said performance portfolio and said commodity index portfolio is not correlated with said base portfolio; and

upon expiration of said predetermined time period, providing to said investor from said issuer;

(a) said principal amount; and

(b) a return comprising a product of a change in value of said base portfolio exposure and said commodity index portfolio exposure over said predetermined time period multiplied by a payout factor.

9. A method utilizing a unitary note investment as recited in claim 8 wherein said payout factor is less than one.

10. A method utilizing a unitary note investment as recited in claim 8 further comprising the step of selecting said base portfolio exposure amount to be equal to said principal amount.

11. A method utilizing a unitary note investment as recited in claim 8 wherein said passive commodity index portfolio includes bonds and currencies.