Multi-asset participation structured note and swap combination

• US 6,922,677 B1
• Filed: 03/25/1999
• Issued: 07/26/2005
• Est. Priority Date: 03/25/1999
• 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:
  US09/275,758
• Time in Patent Office: 2,315 Days
• Field of Search: 705/36, 705/37, 705/35
• US Class Current: 705/36.00R
• 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.

Claims

1. A unitary swap and structured note investment instrument, comprising:

a predetermined time period for said instrument;

a performance portfolio;

a structured note having a face amount equal to an investment principal and providing an incremental benchmark exposure as well as a commodity index exposure;

said performance portfolio, at the initiation of said predetermined time period, comprising,

(a) a benchmark portfolio having a benchmark portfolio exposure,

(b) an incremental benchmark portfolio having said incremental benchmark portfolio exposure less than 50% of said benchmark portfolio exposure,

(c) a commodity index portfolio, of long and short positions, in an amount equal to said benchmark portfolio exposure multiplied by a leverage factor of at least 100%, which together define said commodity index exposure and reduce the risk while increasing the return of said performance portfolio, wherein said commodity index portfolio is not correlated with said benchmark and incremental benchmark portfolios; and

a return comprising a change in value of said benchmark and incremental benchmark portfolios and said commodity index exposure over said predetermined time period.

2. A unitary swap and structured note investment instrument as recited in claim 1 in which said investment principal invested in said structured note serves as collateral for said benchmark portfolio exposure.

3. A unitary swap and structured note investment instrument, as recited in claim 1, wherein said investment principal invested in said structured note is returned to an investor by an issuer at the end of said predetermined time period.

4. A unitary swap and structured note investment instrument as recited in claim 1 further comprising a releveraged commodity index portfolio, of long and short positions, having an exposure in an amount which is a function of the said commodity index exposure and a second leverage factor.

5. A unitary swap and structured note investment instrument as recited in claim 1 wherein said benchmark portfolio is keyed to an equity index.

6. A unitary swap and structured note investment instrument as recited in claim 5 wherein said equity index comprises the S &

P 500 Stock Index.

7. A unitary swap and structured note investment instrument as recited in claim 1 wherein said leverage factor is a function of the performance of said commodity index portfolio over a selected period of time.

8. A unitary swap and structured note investment instrument as recited in claim 7 wherein said leverage factor of said commodity index portfolio is a first predetermined number if said commodity index portfolio has had a specified return over a selected period of time and is a second predetermined number if said commodity index portfolio has not had said specified return over said selected period of time.

9. A unitary swap and structured note investment instrument as recited in claim 8 wherein said first predetermined number is 100% and said second predetermined number is 150%.