Deutsche Bank AG sold $108.1 million of one-year notes tied to the MSCI EAFE Index, the largest such offering in data going back three and a half years.
The securities, issued July 19, yield twice the benchmark’s gains, with returns capped at 22.3 percent and all capital at risk, according to a prospectus filed with the Securities and Exchange Commission. If the index declines from its initial value, the investor loses a proportionate amount of principal. JPMorgan Chase & Co. distributed the notes for a 1 percent fee.
The gauge of 908 companies in developed-market countries outside the U.S. and Canada rose 9 percent this year to 1,753.91 at the close of trading yesterday. Index members include Vevey, Switzerland-based Nestle SA, the world’s biggest food company, and HSBC Holdings Plc, Europe’s biggest bank.
“It looks like Europe is starting to mend itself,” said Tom Mangan, a money manager at James Investment Research Inc. in Xenia, Ohio, who oversees about $4.2 billion in assets. Growth in Asia and accommodative economic policies have contributed to the index’s rise this year, he said.
Investors have bought $880 million of securities tied directly to MSCI EAFE this year, according to data compiled by Bloomberg. That’s more than three times the $269.2 million sold during the year-earlier period.
Banks create structured notes by packaging debt with derivatives to offer customized bets to retail investors while earning fees and raising money. Derivatives are contracts whose value is derived from stocks, bonds, commodities and currencies, or events such as changes in interest rates or the weather.