Leistung schafft Vertrauen
Bull & Bear certificates?
How to invest with
Nordnet / 19 May 2016
Heiko Geiger,
Bank Vontobel Europe AG
Important legal information
This presentation serves solely to provide you with information and does not constitute a solicitation or offer by Bank Vontobel
Europe AG, Frankfurt am Main branch (referred to collectively with affiliates as "Vontobel"), to purchase or sell securities. The
information provided to you in this presentation does not constitute financial analysis and also does not satisfy the statutory
requirements for ensuring the unbiased nature of financial analysis; nor is such information subject to a ban on trading prior to the
publication of financial analyses.
The information included in this presentation does not constitute any investment, tax or other advisory service. Such information
does not take into account your specific situation as regards to your investment targets and risk appetite. Such information does not
replace the advice by your bank or any other tax or financial adviser which is essential in each individual case prior to taking any
purchasing decision.
In order to receive detailed information pertaining in particular to the structure and the risks associated with an investment in the
securities, you should read the relevant base prospectus which, in addition to the final terms and any supplements to the base
prospectus, is published on the webpages of the Issuer (https://certificates.vontobel.com) and which is obtainable free of charge
from the Issuer, Vontobel Financial Products GmbH, Bockenheimer Landstrasse 24, 60323 Frankfurt am Main, Germany. Investors are
requested to comply with the applicable selling restrictions.
Historical price performance is not a reliable indicator of future price performance of the underlying or the securities. Note that the
payment of tax, commissions and fees may have a negative impact on the return of investment.
Not all structured products issued by the Issuer are suitable or appropriate for an investment by an interested investor. The purchase
of such securities may be linked to risks. It is strongly recommended to seek for independent advice by tax or financial advisers as
well as distribution partners prior to taking any purchasing decision.
The reproduction, distribution, modification or any other use of this presentation (in full or in part) without the written consent of
Vontobel is prohibited.
Publisher: Bank Vontobel Europe AG, Frankfurt am Main branch, Bockenheimer Landstrasse 24, 60323 Frankfurt am Main, Germany.
Copyright© 2016 Vontobel. All rights reserved.
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Vontobel – Bull & Bear Certificates
� Presentation of the Vontobel Group
� What are Bull & Bear certificates
� Functionality of Bull & Bear certificates
� Bull & Bear certificates at http://certificates.vontobel.com
� Vontobel specialises in asset management for private clients and institutional investors as well as in investment banking.
� Founded in 1924
� 90 years of entrepreneurial independence� Still family-run via majority shareholding
� Listed on the SIX Swiss Exchange since 1986
� Head office in Zurich, 21 locations worldwide
� Around 1.500 employees
� Moody‘s rating Aa3 (long-term deposit rating Bank Vontobel AG)
� Three divisions: Private Banking, Asset Management, Investment Banking
� Key figures:*- Total client assets: CHF 187 bn- Equity: CHF 1,40 bn
- CET1 capital ratio: 17,9%
- Dividend per share CHF 1,85 for 2015
Vontobel in brief
Global investment advisor with a long tradition and strong capital base
*as of 30 June 2015
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Our core capabilities
1. Protect and build wealth
3. Deliver tailor-made investment solutions
2. Manage assets actively
We take a long term approach in protecting and building the wealth, our clients
have entrusted to us. In doing so, we provide our clients with responsible and
forward-looking advice, transcending generations.
We implement tailor-made investment solutions for our clients. Additionally our
products and processes are based on the latest forward-looking research.
As active asset manager, we provide financial added value for our clients and
develop first-class solutions for return optimisation and risk management.
10 September 2015
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Vontobel - Bull & Bear Certificates
� Presentation of the Vontobel Group
� What are Bull & Bear certificates
� Functionality of Bull & Bear certificates
� Bull & Bear certificates at certificates.vontobel.com/
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Bull & Bear certificates
Definition:
Bull & Bear certificates are bonds issued by the respective issuer. They
are leveraged financial products, without a fixed expiry. They allow
investors to participate disproportionately in the performance of the
respective reference instrument. The leverage remains constant, thus the
investment is equivalent to a reinvestment on a daily basis.
� Investors can participate disproportionately on stable (positive or negative) price trends
� Special strengths in stable trends� Although they offer opportunities for disproportionately high gains, the leverage works in both
directions and can also result in disproportionately heavy losses
Bull & Bear certificates – Investing with a constant leverage
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Characteristics of Bull & Bear certificates
Optimally harness stable price trends without a fixed expiry
In normal market phases nearly no impact on the pricing of the factor certificate due to
volatility
Constant leverage over the product’s lifetime and a transparent structure due to the underlying factor index
Application scenarios:
Not suitable for an alternately rising and falling trend -> sideways
markets
Rising market trend:Bull certificate (Long)
Declining market trend:Bear certificate(Short)
Functionality of Bull & Bear certificates
� Each certificate replicates the performance of an underlying factor index at a fixed
ratio
� The factor index disproportionately reflects the performance of the reference instrument on a daily basis by multiplying the change in its value by a constant factor
� The factor index ensures a high degree of transparency with a dedicated index portal: https://indices.vontobel.com
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Example: The value of a Bull certificate with a leverage of 4 will rise four-times as much as the reference instrument. If the reference instrument rises by 2%, the value of the certificate will rise by 8%. On the other
side it will lose 8% of its value when the reference instrument decreases by 2%.
Bull certificate on the 4x Long
Index linked to DAX
4x Long Index linked to DAX DAX
Calculating the Factor Index I
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Factor Index
Leverage component
+ / -
-
Leverage financing
Index fee
Financing component
Calculating the Factor Index II
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1 The current daily financing spread and the index fee are published on the index portal page for the index in question (https://indices.vontobel.com)2 Appreciative effect only as long as income from overnight funds exceeds the costs of the purchase (financing spread), otherwise depreciative effect
Long Factor Index
Financing component
Multiple short selling of the reference instrument
in accordance with the leverage (factor)
Factor financing: Costs of obtaining capital for multiple purchases of the reference instrument
in addition to the financing spread -› depreciative effect
Index Fee1: fee for administration and the
calculation of the factor index, charged on an
ongoing basis -› depreciative effect
Factor financing: Income from the overnight
funds of the proceed from multiple short selling
of the reference instrument less the costs of the purchases -› appreciative effect is possible2
Index Fee1: fee for administration and the
calculation of the factor index, charged on an
ongoing basis -› reduces value of the factor index
Short Factor Index
Leverage component
Multiple investment in the reference instrument in
accordance with the leverage (factor)
Financing component
Leverage component
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Vontobel - Bull & Bear Certificates
� Presentation of the Vontobel Group
� What are Bull & Bear certificates
� Functionality of Bull & Bear certificates
� Bull & Bear certificates at certificates.vontobel.com/
� Stable performance – constantly rising price trend
- The higher the factor, the higher the
performance gains of a Factor Index (long)
- Factor Indices (short) behave in the
opposite manner, and they suffer disproportionately high losses when the
reference instrument rises
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Note: The examples shown above are fictitious and for illustrative purposes only. In the interests of simplicity, only the leverage of a factor index is shown here. The financing component is not taken into account.
Price scenario examples – I. Price increase (Bull market)
Price scenario examples – II. Price decrease (Bear market)
� Stable performance – constantly declining price trend
- The higher the factor of the Factor Index
(short), the higher the returns
- By contrast, Factor Indices (long) suffer
corresponding losses when the reference instrument declines.
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Note: The examples shown above are fictitious and for illustrative purposes only. In the interests of simplicity, only the leverage of a factor index is shown here. The financing component is not taken into account.
Price scenario examples – III. Sideways markets
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� Fluctuating performance – alternately rising and falling price trend
- The reference instrument rises and falls alternately day by day, and therefore remains in a sideways phase, hovering around the starting point. The factor
index is subject to strong fluctuations and alternately posts strong gains and losses
- General rule: - Heavy losses can arise within just a few days when the reference
instrument is in a sideways phase – even leading to a total loss- This risk increases, the stronger the price fluctuations and the higher the
leverage
Bull & Bear
certificates are not
suitable for a
sideways phase and
are not Buy-and-Hold products!
Note: The examples shown above are fictitious and for illustrative purposes only. In the interests of simplicity, only the leverage of a factor index is shown here. The financing component is not taken into account.
Intraday index adjustments
� The barrier sets the maximum negative price change in the reference instrument compared with the last valuation price that is permitted before an
intraday index adjustment is made
� The barrier is a fixed percentage of the valuation price and depends on the leverage; the absolute amount is defined daily.
� Illustration on the basis of a Bull certificate with leverage 4
� The reference instrument hits the barrier of 68.00 EUR during day 2, therefore an intraday index adjustment is made
� For calculating the remaining day’s yield the new valuation price of 8.00 EUR is taken into account. The new barrier will be at 54.40 EUR (80%
of the respective valuation price of the reference instrument)
� Disadvantage: occurred losses are realized without the chance of recovery
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Time Reference Instrument Factor Index x4 Barrier
in EUR return in EUR return in EUR Percentage of valuation price
End of day 0 100.00 100.00 80.00 80%
End of day 1 85.00 -15.00% 40.00 -60.00% 68.00 80%
During day 2 68.00 -20.00% 8.00 -80.00% 54.40 80%
End of day 2 75.00 10.29% 11.29 41.18% 60.00 80%
End of day 3 100.00 33.33% 26.35 133.33% 80.00 80%
Note: The examples shown above are fictitious and for illustrative purposes only. In the interests of simplicity, only the leverage of a factor index is shown here. The financing component is not taken into account.
Barrier in order to reduce losses up to the prevention of a total loss
Effects of market behavior on Bull & Bear certificates
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Effects of extremely volatile markets:
� During sharply declining markets the costs for the market maker for hedging and taking risks increase
� The costs for these hedging-instruments are highly variable and extremely high in volatile markets
� They influence the pricing of Bull & Bear certificates.
� During a recovery of the reference instrument the increase of the certificate will be less than expected according to its leverage
� This premium for risk will be phased out the following days
Distressed Bull & Bear CertificatesIllustrated with an example of a Long Certificate
Intrinsic Value of the Bull & BearCertificate
Price of the Bull & Bear Certificate
Mark
et Tu
rbulences
Value of the FIC
Risk Margin
Price of the Bull & BearCertificate
Risk Margin
Distressed Bull & Bear CertificatesIllustrated with an example of a Long Certificate
60
80
100
120
140
160
180
DAX Index
BULL DAX X10
� Bull certificate offer much greater return possibilities to investors than a direct investment.
However, the leverage works both ways and heavy losses may occur.
� Short-term investment product to take part disproportionately of a stabile rising price trend.
A comparison of leverage products
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Bull & Bear certificates Knock-out warrants Mini-futures
Leverage Constant Variable Variable
Volatility impact No No No
Lifetime Open end Limited Open end
Knock-out No Yes Yes
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Opportunities and risks of Bull & Bear certificates
Opportunities Risks
� Benefits from stable (positive or negative) price
trends
� Constant leverage (factor) over the product‘s
lifetime
� In normal market phases Volatility does not
have an impact on the pricing of the certificate
� No knock-out: only built-in barrier allowing for an intraday adjustment
� No fixed expiry (open end)
� Big product palette offers multiple market access: visit certificates.vontobel.com/FI/ for
details
� The leverage works both ways (also if performance
takes a direction contrary to the market
expectation)
� The barrier cannot be seen as a buffer, since it can only mitigate further losses
� The worst-case scenario is a total loss of the capital invested, even if the barrier is triggered
� Investors bear the currency risk and the risk of
the issuer defaulting (issuer risk)
� Not suitable for an alternately rising and falling
trend
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Vontobel - Bull & Bear Certificates
� Presentation of the Vontobel Group
� What are Bull & Bear certificates
� Functionality of Bull & Bear certificates
� Bull & Bear certificates at certificates.vontobel.com/FI/
Vontobel Webpage
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1
3
2
4
5
Product features1. Current valuation price of the
reference instrument2. Barrier
3. Current financing spread4. The factor index on which the
factor certificate is based with a
direct link to the index portal5. Reference instrument underlying
the factor index
� certificates.vontobel.com/FI/ offers an overview of all
products, current and historical prices and much more
� Relevant product information can be found on
certificates.vontobel.com/FI/
Factor index portal
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1
4
2
5
3
Product features1. Factor index name with symbol
and ISIN2. Current factor index value with
currency3. Current valuation price of the
reference instrument
4. Current financing spread5. Index fee and relevant interest
rate for the financing component
� Transparent structure due to the factor index portal
(https://indices.vontobel.com)
� Adjustments of Index Parameters are displayed under
“Index History*”
*
Overview Bull & Bear Certificates(currently 457 Bull & Bear Certificates)
Asset-class Bull certificates Bear certificates
Indices- OMX®
- DAX®
- EURO STOXX 50®
- EURO STOXX 50® Banks Index- Nasdaq-100 Index®
- Standard & Poors 500® Index
- Dow Jones
+3, +5, +8,
+10, +12, +15
-3, -5, -8,
-10, -12, -15
Scandinavian stocks- 33 underlyings
+3, +5 -3, -5
American stocks- 14 underlyings
+3, +5 -3, -5
German stocks- 9 underlyings
+2, +3, +4, +5 -2, -3, -4, -5
Precious metals &
commodities- 12 underlyings
+3, +4, +6, +5, +8, +10 -3, -4, -6, -5, -8, -10
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Stand: 18.05.2016
Bull & Bear Matrix
Tag Monat JahrAutor, Version Seite 26
The Bull & Bear Certificates-brochure in Finish!
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Bank Vontobel Europe AG
Frankfurt am Main
Bockenheimer Landstr. 24
60323 Frankfurt am Main
Germany
www.certificates.vontobel.com/FI/FI
Thank you for your attention!
Heiko Geiger
Head of Public Distribution Europe
0800 91 77 91 (phone)
[email protected] (mail)
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