Tailored Structured Solutions
In addition to standard structured products, we also provide
access to tailored structured solutions to meet the individual
investment needs for clients with significant sums to invest.
Please take a moment to review examples of some of the tailored
structured solutions we can offer:
Equity Swap
Monetizing Equity Collar
Dual Currency Deposit
Stock Loan
Repurchasing Agreement (Repo)
Equity Swap
An equity swap is a contract that commits two parties to
exchange, over a specified period, two streams of periodic
payments on a monthly, quarterly or annual basis. The payments
in one stream are calculated as the increase in value, if
any, plus dividends applied to an agreed notional principal
amount. The payments in the second stream are calculated as
the loss, if any, plus an agreed short-term interest rate
applied to the same notional principal amount. Private clients
must be willing to swap on a minimum of US $5,000,000 (or
equivalent) notional principal amount, which is the predetermined
dollar principal on which the exchanged interest payments
are based. Generally, the notional principal amount is not
paid or received by either party.
Some benefits of an equity swap may include:
- Mitigating the consequences of withholding tax on dividend
payments
- Achieving the economic effect of holding shares without,
in fact, holding them (i.e. re-characterization of income)
Monetizing Equity Collar
A monetizing equity collar is the combination of an equity
collar and a loan. An equity collar, the simultaneous purchase
of a put and sale of a call, allows an investor to hedge a
significant portion of downside risk whilst enjoying some
of the upside potential. Target investors for this type of
structure are large single-stock owners.
Some benefits of a monetizing equity collar include:
- Retaining legal ownership of the shares
- Ability to get credit and thereby diversify into other
investments
- Protection from a decline in the stock price
- Little or no upfront payment
To participate, the stock value must equal a minimum of US
$5,000,000 (or equivalent).
Dual Currency Deposit
The Dual Currency Deposit provides an enhanced return on a
short-term deposit (of the same terms) in one currency (base
currency), in return for accepting possible repayments of
the deposit principal plus interest in another currency (alternate
currency). The client places a deposit and will receive a
higher rate of interest in comparison to a normal deposit,
irrespective of what happens to the exchange rate, however,
the principal may be received back in the alternative currency
if the exchange rate passes a pre-determined rate.
Some benefits of a Dual Currency Deposit may include:
- Offering a higher yield over a normal deposit of
the same terms such as notional amount, term to maturity
and currency
- Suitable to clients who have a portfolio in numerous
currencies and are used to switching between currencies
to express an exchange rate view
Stock Loan
A Stock Loan can potentially offer enhanced dividend returns
for investors with large stock positions (min. $10 million)
facing the potential consequences of withholding taxes. Clients
may be able to mitigate some withholding tax liability and
increase their returns. While RBC borrows the shares the trading
desk may be able to generate additional income to the lender
via daily trading activities. Client receives a pre-agreed
manufactured dividend and a fee for lending the equity to
RBC.
Some benefits of a Stock Loan may include:
- Mitigating the consequences of withholding tax
- Generating additional income by borrowing the stock
to RBC
Repurchase Agreement (Repo)
A repurchase agreement or ‘Repo’ is a lending
transaction where one party agrees to sell securities (e.g.
single bond) to another party for consideration (normally
cash) while at the same time the party agrees to repurchase
the same securities back at a specific price on a specific
day in the future, typically 1 month.
Some benefits of a Repurchase Agreement may include:
- Yields are generally superior to Treasury bills
- A secured Lending transaction with highly rated collateral
Contact Us
If you are a client of Royal Bank of Canada Global Private
Banking, please contact your investment advisor or relationship
manager to learn more about how structured products can be
beneficial to you. If you prefer, you may also
online.
If you are not a Royal Bank of Canada Global Private Banking
client, but you would like to learn more about structured
products, please
Products and Services referenced in this
page are provided by various RBC Financial Group companies
based in different jurisdictions. Potential clients should
note that the regulatory regime, including any compensation
or investor protection arrangements, may well be different
from their home jurisdiction. You should carefully read any
regulatory disclosures contained in any literature forwarded
to you by Royal Bank of Canada Global Private Banking offices.
Depending on your citizenship and residency, these products
may not be available to you or may only be available from
certain RBC Financial Group companies. For example, some Guaranteed
Structured Deposit Accounts are only provided by RBC Financial
Group subsidiary companies which only do business in Guernsey
and Jersey, and are not available to citizens and residents
of the USA.
The value of investments may fall as well
as rise and investors may not get back the amount originally
invested. Potential investors should seek appropriate advice
before making any investment decision.
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