Morgan Stanley has a sales target of $3.5m for the second tranche of Buffered Performance Leveraged Upside Securities, which offers exposure to a basket of exchange-traded funds.
The one-year growth structure pays 200% of the rise in a basket of ETFs, capped at 133%. It is weighted 45% to SPDR S&P500, 25% to iShares MSCI EAFE, 15% to iShares MSCI Emerging Markets and 15% to iShares Russell2000. Capital will be reduced one for one with any fall below 10% of the initial basket level.
"Using exchange-traded funds in structured products allows you to avoid futures portfolios based on complex algorithms which are more expensive," said a London-based structurer at a rival bank. "The ETF fees are also offset by carry fees on derivatives swaps and the higher costs of futures prices."
According to SRP data, a number of US providers have issued structured notes linked to ETFs this month. JPMorgan has launched seven products, including the $5m 2-Y Buffered Plus ETF, linked to the MSCI Emerging Markets Index Fund ETF, which was hedged by Morgan Stanley. Credit Suisse has marketed two Callable Yield Notes linked to the MSCI Australia Index Fund ETF and the MSCI Brazil Index Fund ETF. UBS is currently marketing Autocallable Optimisation Securities with Contingent Protection, a one-year knockout linked to the Energy Select Sector SPDR Fund ETF.
So far this year, 316 products linked to ETFs have been issued in the US with estimated sales of $1.06bn. The top five issuers are Barclays Bank (129), JPMorgan (50), HSBC (43), Credit Suisse (43) and Morgan Stanley (15).
Morgan Stanley's Buffered Plus notes started trading on 4 June.
This product will be available shortly in Recent Additions (US).