Glossary

Also known as a ratchet fund. A particular type of structured product that aims to deliver minimum returns, which usually are at least equal to the sum invested, plus some additional upside based on the performance of the stock market. However, unlike guaranteed funds, very few floor funds come with a contractual guarantee. Many floor funds are managed using the technique of constant proportion portfolio insurance (CPPI).

Formula-based funds allow investors to combine exposure to an underlying asset and guaranteed income or capital on expiry together with maximum flexibility.This return is achieved by using derivative instruments ''that aim to deliver conditional performance by a predefined strike date based on the performance of an index, a basket of indices or assets, or a combination of these indices or assets. This guaranteed performance (the ''formula'') is also the object of a guarantee provided by a third party, whereby the fund manager may not invest in its own funds on behalf of the investor'' (as defined by AMF, the French financial markets regulatory authority). Building on this basic structure, there are various types of underlyings and types of structures. They consist of a trade matrix which combines the type of underlying used with the type of index used. These new structures do not necessarily guarantee the capital invested on maturity.