JPMorgan has announced plans to offer additional commodity-linked structured products to both institutional and high net worth clients through its global commodities unit. The announcement follows a period of growth for the US bank which has seen it add 50 executives to the company so far this year.
To coincide with the growth, the former head of the Americas structured investment group, Mike Camacho, has become head of global structured commodities at the firm. Camacho will be responsible for the structuring and sale of commodity-linked products.
“Commodities offer high returns, and outperformed other asset classes between 1986 and 2006, albeit with more volatility,” said Camacho at a US structured products industry conference two weeks ago. “Investors realise that commodities can offer returns unrelated to other asset classes, and can be used as an inflation hedge. Because of this, there’s been a surge in demand from investors.”
Last year, JPMorgan launched a new commodity-linked index, the JPMorgan Commodity Curve index, which holds exposures along the entire commodities market curve. In September 2006, the firm unveiled the JPMorgan Commodity Investable Global Asset Rotator Excess Return index, upon which the firm has successfully structured $1bn in notes that use the index as underlying, Camacho said.
The index applies a momentum-based algorithmic strategy for allocating commodities equally across up to 12 commodity sub-sectors based on specific performance and consistency tests. This methodology has allowed JPMorgan to create a synthetic portfolio of commodity sub-indices within a single, dynamic basket.
SRP’s product database includes a total of 225 commodity-linked products from various issuers with strike dates in 2007. Of these, approximately 25 commodity-linked structured products were issued by JPMorgan this year with an estimated $175m of sales.
