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Leveraged Floating Rate Certificate on Emerging Markets

  • When looking for attractive investment solutions within the challenging fixed income market, we find emerging market (EM) hard-currency corporate bonds attractive. They are supported by compelling valuations and relatively healthy balance sheets.
  • Investors looking to invest in this segment may consider the JB Leveraged Floating Rate Certificate linked to a Portfolio of Emerging Markets Bonds.
  • This product offers 300% participation in a portfolio of EM hard-currency bonds (the underlying), which are equally weighted. The composition of the underlying portfolio is based on the investment advice and recommendations of Julius Baer Research.
  • This certificate provides a floating coupon linked to the USD 3-month LIBOR and has embedded leverage. In contrast with a traditional investment in a bond portfolio, this product offers a duration hedge on the underlying bonds. In the case of increasing interest rates, investors benefit from a higher floating coupon.
  • Due to the non-recourse type of leverage, the client cannot lose more than initially invested in the product. In the absence of a credit event or a stop-loss event, the investment is expected to pay back 100% at maturity.
  • The product reaches the stop-loss trigger if the NAV of the product drops to 60%, or lower, of the initial price. If the stop-loss is triggered, the entire bond portfolio will be liquidated and the short cash position will be paid back.
  • This product has a high product risk rating. Due to the built-in leveraged exposure in the underlying bonds, the certificate’s NAV will have a significantly higher volatility and drawdown risk compared to a direct investment.
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