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Structured Investments
CPPI "cushion" funds (Portfolio Insurance)
Systematic rules are applied depending on the parameters defined at the start of the investment, according to the investor’s specific needs, in order to regulate asset exposure in line with upward and downward movements in the risky and risk-free assets.
Bespoke investment parameters
Depending on the trend in risky assets, the rules on buying and selling are applied according to various predefined parameters. Thus, when the price of risky assets falls, the exposure to these assets is reduced, and vice versa – when they rise, exposure increases.
Once the nature of the guarantee has been defined, a parameter known as the "floor" is established. The floor represents the fraction of the net asset value that the asset manager must not lose. It is equal to the discounted value of the level of the guaranteed NAV at maturity.
Depending on the nature and associated risk of the asset class to which the portfolio is exposed, we define a multiplier coefficient. The coefficient determines the level of allocation to risky assets and applies to the cushion above the floor.
These two parameters (floor and multiplier coefficient) mean that the net asset value (NAV) of a CPPI fund can be easily determined at any time:
Cushion = (NAV – Floor) / NAV
Allocation to risky assets = Multiplying Coefficient x Cushion
Our strengths
The principle is simple:
Part of the capital is invested in risk-free assets
The remainder is placed in risky assets (rate-based, equity-based, diversified UCITS, or even hedge funds)
