Unitary investment having interrelated assets

• US 20050108139A1
• Filed: 11/12/2004
• Published: 05/19/2005
• Est. Priority Date: 03/12/1999
• Status: Active Grant

• Current Assignee: Alpha Financial Technologies LLC
• Original Assignee: Alpha Financial Technologies LLC
• Inventors: Sperandeo, Victor H.
• Granted Patent: US 7,860,779 B2
• Time in Patent Office: Days
• US Class Current: 705/36.R
• 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

1-44. -44. (canceled)

45. An investment comprising:

a predetermined time period for holding the investment;

a base portfolio having a base portfolio exposure;

a passive commodity index portfolio, of long and short positions, in an amount substantially equal to the product of the base portfolio exposure multiplied by a leverage factor of at least 100%, wherein the product defines a passive commodity index portfolio exposure that reduces the risk while increasing the return of the investment; and

a return comprising substantially the change in value of the base portfolio exposure and the passive commodity index portfolio exposure over the predetermined time period.

46. The investment as recited in claim 45 further comprising a collateral deposit.

47. The investment as recited in claim 46 wherein the base portfolio exposure is substantially equal in value to the collateral deposit.

48. The investment as recited in claim 46 wherein the base portfolio has a notional component, and wherein the value of the base portfolio exposure is greater than the value of the collateral deposit.

49. The investment as recited in claim 45 further comprising:

a rebalanced base portfolio having an exposure in an amount substantially equal to the sum of the base portfolio exposure and the changes in value of the base portfolio exposure and of the passive commodity index portfolio exposure; and

a releveraged passive commodity index portfolio, of long and short positions, having an exposure in an amount substantially equal to the product of the rebalanced base portfolio exposure multiplied by a second leverage factor.

50. The investment as recited in claim 49 wherein the second leverage factor is a function of the performance of the passive commodity index portfolio over a selected period of time.

51. The investment as recited in claim 45 further comprising a loss limitation which limits the maximum loss an investor can incur as a result of a change in value of the passive commodity index portfolio exposure.

52. The investment as recited in claim 51 wherein the loss limitation is a put option.

53. The investment as recited in claim 45 further comprising:

a rebalanced base portfolio exposure to replace the base portfolio exposure; and

a releveraged passive commodity index portfolio exposure, of long and short, positions, to replace the passive commodity index portfolio exposure.

54. The investment as recited in claim 45 wherein the base portfolio is keyed to an equity index.

55. The investment as recited in claim 54 wherein the equity index comprises the S &

P 500 Stock Index.

56. The investment as recited in claim 45 wherein the base portfolio comprises a pre-existing portfolio held by the investor.

57. The investment as recited in claim 56 wherein the base portfolio comprises stocks, bonds, T-bills, cash, currencies, mortgages, any other security, or a combination thereof.

58. The investment as recited in claim 45 wherein the passive commodity index portfolio is keyed to the S&

P Diversified Trends Indicator.

59. The investment as recited in claim 45 wherein the passive commodity index portfolio includes bonds and currencies.

60. The investment as recited in claim 45 wherein the leverage factor is a function of the performance of the passive commodity index portfolio over a selected period of time.

61. The investment as recited in claim 45 wherein the leverage factor is a first predetermined number if the passive commodity index portfolio has had an equal or greater than a specified return over a selected period of time and a second predetermined number if the passive commodity index portfolio has had less than the specified return said the selected period of time.

62. The investment as recited in claim 61 wherein the first predetermined number is 300% and the second predetermined number is 150%.

63. The investment as recited in claim 61, wherein the first predetermined number is at least 100% and the second predetermined number is greater than the first predetermined number.

64. The investment as recited in claim 45 wherein the leverage factor is less than or equal to 150%.

65. The investment as recited in claim 45 wherein the leverage factor is at least 50%.

66. The investment as recited in claim 45 wherein the leverage factor is less than or equal to 300%.

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