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UBS launches its first commodity guaranteed fund
UBS announced that it is launching its Commodity 3 year Guaranteed Fund today, the first in its SUPER Funds series. The Guaranteed Fund has a tenor of three years maturing in December 2008 and is 100% principal protected at maturity.
The Fund offers a guaranteed coupon of 2% in six months. Its performance is linked to the highly liquid Dow Jones-AIG Commodity IndexSM 1. The Index is composed of future contracts of 19 physical commodities, including aluminium, coffee, copper, corn, cotton, crude oil, gold, heating oil, lean hogs, live cattle, natural gas, nickel, silver, soybeans, soybean oil, sugar, unleaded gasoline, wheat and zinc.
In addition to the 2% guaranteed coupon, at maturity, investors will receive a potential payout which is determined solely by the positive quarterly index return over the entire tenor of the Fund.
While the participation rate of the Fund is expected to be between 30% and 60%, the exact level of the participation rate will be determined on 25th November - the investment date, and is subject to prevailing market conditions.
"Declining real commodity prices have passed a secular inflection point, pointing towards a long and sustained up-phase. Commodity prices have been on an upward trend for the past four years," said Gary Hung, a Director in UBS Investment Bank's Risk Management Products team.
"Limited commodity supply capacity, coupled with demand growth in emerging economies will continue to buoy commodity prices."
"Historically, commodities have had a low correlation to asset classes such as equities and bonds. Investors in the fund will gain exposure to a basket of global commodities, allowing them to take advantages of the growth potential while at the same time diversifying their portfolios with traditional assets."
The US dollar-denominated fund is available for initial subscription by retail investors in Hong Kong from 18th October to 18th November. Shares in the fund cost US$1,000 and a minimum investment of US$5,000 is required.
UBS's Equity Risk Management Products team was placed first in all nine equity categories in Asiamoney's inaugural structured products poll last year and UBS was named Equity Derivatives House of the year in Asiamoney's structured products poll in 2004 and 2005. UBS was also voted Overall Best Provider in the Equity category. In addition, Asia Risk and The Asset named UBS Equity Derivatives House of the Year for 2004.
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