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16th March 2011 For Professional Investors only This document is not intended for use by or targeted at retail customers. Should a retail customer obtain a copy of this document they should not base their investment decisions solely on the basis of this document but must seek independent financial advice. Beyond ETFs Bloomberg: SGLP <GO> Reuters: SGLP www.sglistedproducts.com Exchange Traded Products 0207 762 email@example.com
benchmark commodity indices outperformed headline “spot” commodity prices
Since then, many
commodity markets have persistently traded in contango, leading to underperformance of benchmark indices
A closer look at oil in 2009 and 2010 * Source: Bloomberg 07/03/11 Past performance is not a guide to future performance
Comparing active and passive managers in rising markets * Source: Bloomberg 07/03/11 Past performance is not a guide to future performance
Dynamics of the commodity futures market Contango When the prices for futures contracts are higher in the distant delivery months than in the nearer delivery months, the market is said to be in “contango.” This generally has a negative impact on index values, as the higher longer-term future prices move lower over time to the shorter- term prices. This potential convergence over time is often referred to as a negative “roll yield”. Backwardation When the prices for futures contracts are lower in the distant delivery months than in the nearer delivery months, the market is said to be in “backwardation.” Holding, backwardation generally has a positive impact on index values, as the lower longer-term future prices move higher over time to the shorter-term prices. This potential convergence over time is often referred to as a positive “roll yield”. More information about the roll and the indices is found on the S&P website.
Track a specific long-dated future rather than rolling short-term futures every month Examples: SG95 – tracking Dec 2013 Brent Crude Oil SG96 – £ hedged version of SG95 Comparing the WTI and Brent Crude Oil futures curves * Source: Bloomberg 07/03/11 Past performance is not a guide to future performance
Low cost asset allocation using an Exchange Traded Product
Actively Managed Tracker An Exchange-traded product that tracks your asset allocation strategy
The Asset Manager allocates across pre-selected underlying assets, including equity indices,
commodity and bond ETFs and cash.
The investor buys a single Exchange-traded product that closely tracks the portfolio of assets.
The Asset Manager can make changes to the asset allocation at any time by simply sending an
Efficient asset allocation – allows asset managers to give their clients efficient access to their asset allocation model.
Dynamic – Possibility to make daily changes to the portfolio, executed off closing levels.
Simplicity – A single e-mail to SG is all that is needed to make changes to the asset allocation for all the investors that own the security.
No Tracking Error – reduce tracking error by tracking equity indices directly, with payout and liquidity directly linked to the index.
Low cost – Reduce costs by directly tracking equity indices, removing fund TER.
Tax efficiency – Changes to the portfolio don’t result in a tax event. Investors can buy/sell units of the Tracker as required, e.g. to realise a capital gain or loss. Depending on the structure, the Tracker can be held in an ISA or SIPP, and taxable to CGT or income tax.
Liquidity – Listed and quoted on the LSE – tradable live throughout the day. Quoted prices are in line with index level (no discount/premium), and with a defined bid-ask spread.
Actively-managed Tracker – Features (continued)
Access clients on different platforms – Clients need not invest directly through you – for example, the product can be held in a brokerage account, reducing costs.
Prospecting tool – Allow potential investors to dip their toe in to your expertise – the security is traded like a share or ETF.
Flexibility – can be used alongside traditional funds and discretionary portfolios, for example, when clients are looking to increase their investment between annual planning meetings, it is a simple low-touch way of getting invested in a diversified way quickly.
Transparency – Easy for investors to instantly assess performance of an asset allocation strategy, and compare to alternatives. Return and risk data instantly available via Bloomberg.
Flexible issuance platform – Asset managers can allocate across a pre-defined selection of assets including equity indices and ETFs giving access to every asset class.
Revenue generation – Brokerage, performance and/or annual management fees can be built into the terms as required, and paid to the asset manager based on the assets invested in the tracker.
Credit risk – SocieteGenerale – investors shouldn’t be over exposed to a single counterparty.
Important Information This document is issued in the UK by the London Branch of SociétéGénérale. SociétéGénérale is a French credit institution (bank) authorized by the Autorité de ContrôlePrudentiel (the French Prudential Control Authority). SociétéGénérale is subject to limited regulation by the Financial Services Authority in the UK. Details of the extent of our regulation by the Financial Services Authority are available from us on request.
Although information contained herein is from sources believed to be reliable, SociétéGénérale makes no representation or warranty regarding the accuracy of any information. Any reproduction, disclosure or dissemination of these materials is prohibited. The product described within this document is not suitable for everyone. Investors' capital is at risk. Investors should not deal in this product unless they understand its nature and the extent of their exposure to risk. The value of the product can go down as well as up and can be subject to volatility due to factors such as price changes in the underlying instrument and interest rates. Prior to any investment in this product, you should make your own appraisal of the risks from a financial, legal and tax perspective, without relying exclusively on the information provided by us, both in this document and the Pricing Supplement of the product available on the website www.sglistedproducts.co.uk. We recommend that you consult your own independent professional advisors. Investors should note that holdings in this product will not be covered by the provisions of the Financial Services Compensation Scheme, nor by any similar scheme in Curacao. The securities can be neither offered nor transferred in the United States. The tax statement is only a general guide. The tax treatment of investments will depend on an individual’s circumstances. If investors are in any doubt as to their tax position, they must consult with an appropriate professional tax adviser. This statement of the UK tax treatment of the product is based on our understanding of the laws and practice in force as of the date of this document and is subject to any changes in law and the interpretation and application thereof, which changes could be made with retroactive effect. Lyxor and Lyxor ETFs are names used by SociétéGénérale to promote the products of Lyxor Asset Management All gains on the sale of Lyxor ETFs shares and dividend distributions made by Lyxor ETFs may be subject to tax on the basis of applicable tax regulations. Investors must seek their own Tax advice for any further information. The ETF maybe denominated in a currency different to that of the index that it tracks, which means that exchange rate fluctuations could have a negative effect on returns. ETF Trading Currency refers to the currency or currencies in which the ETF can be traded on the London Stock Exchange. Underlying Index Currency refers to the currency of the index tracked by the ETF. Through Lyxor ETFs, investors are exposed to counterparty risks resulting from the use of an OTC (Over-the-Counter) Swap with SociétéGénérale. In-line with UCITS guidelines, the exposure to the Swap Counterparty, Société Générale, cannot exceed 10% of the total fund assets. It is recommended that potential investors study the Prospectus before investing. This document is not aimed at persons who reside in the United States, Canada or any province or territory thereof, where the funds are not authorised or registered for distribution and where no prospectus for the funds has been filed with any regulatory authority. The complete prospectuses for all LSE-listed Lyxor ETFs are available online and can be downloaded from www.lyxoretf.co.uk For more information: see the Terms and Conditions available on our website www.sglistedproducts.co.uk