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Strategy Research

Understanding Defined Outcomes

Defined outcome ETFs are gaining traction in European UCITS, but the payoffs they package are not new. European investors have long used structured notes, certificates and derivative overlays to reshape equity returns. Defined outcome ETFs bring a subset of those payoffs into pooled, exchange-listed vehicles, typically trading some upside participation for protection against a specified range of losses.

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Strategy Research

Accessing Trend Through ETFs

Managed futures is one of the alternative strategies that appears particularly well suited to an ETF structure. Portfolios are predominantly built using liquid futures and forwards, allowing systematic long and short exposure across equities, rates, currencies and commodities. The liquidity and scalability of those instruments can support efficient portfolio adjustment, daily valuation and the ETF creation and redemption process. In this current day, Europe is beginning to test that fit in practice.

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Strategy Research

Understanding Catastrophe Bonds

Catastrophe bonds occupy an unusual position within fixed income. They are bonds in legal form and generate an income stream, yet the risk investors are being paid to assume has relatively little to do with the credit cycle that drives most conventional bond portfolios. Instead, investors provide collateralised insurance capacity against specified events. In return, they receive an insurance premium alongside the income earned on the collateral, while accepting the possibility of losing principal if a covered event breaches the bond’s contractual loss threshold.

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