UniCredit SpA (UCG) is selling structured notes tied to a mutual fund run by money manager Edouard Carmignac, lifting issuance of securities that profit from fund returns to the most in three years in Europe.
Italy’s largest bank is marketing as much as 30 million euros ($41.3 million) of six-year notes that pay yields based on the performance of the Carmignac Patrimoine (CARMPAT) fund, the second-largest euro-denominated mutual fund, according to data compiled by Bloomberg.
Fund-linked notes “are a growing niche,” said Christian Voit, head of fund derivatives structuring for Germany at UniCredit in Munich. “You can think of these notes as a double seat belt. You are protected by an active manager who can move money into cash or less risky assets if he foresees a fall in market prices, and even if he makes the wrong calls, you will still get your money back.”
Carmignac’s fund lost 0.42 percent this year as emerging market equities and bonds declined. Investors in the structured notes would have been shielded from the losses as the notes are capital-protected.
Lenders including Barclays Plc and DZ Bank AG sold 277.5 million euros of fund-linked notes this year, up from 159.8 million euros for all of 2012 and the most since 526.7 million euros was issued in 2010, data compiled by Bloomberg show.
Structured notes package debt with derivatives to offer customized bets to investors while earning fees and raising money. Buyers of the securities, which include institutional investors as well as individuals, bear the risk both of the bank selling the securities and of the underlying assets.
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