CBCM launches structured product for UK schemes

The fund management firm’s UK premia fund will invest in an index of reversed convertibles – a type of bond that gives increased returns but exposes the investor to some equity risk – linked to the FTSE 100.

It will aim to offer pension scheme and other institutional investors an opportunity to make money from the "consistent overpricing" of implied volatility in shares.

CBCM UK and Ireland structured equity derivative sales team member Steve Muzzlewhite explained: "In essence index returns are earned by selling implied volatility on the FTSE 100, historically this is higher than the realised volatility.

"This excess return is at its highest in times of market stress, so the index will always outperform the FTSE 100 in a falling market measured between any two rolls of the strategy, with the greatest excess returns likely to be generated in distressed and bear market conditions."

He added: "Whilst market commentators appear to be split as to if we are entering a bear market phase or not, most seem to agree we will continue to see increased volatility in equity markets.

"CBCM recognises this and the UK Premia Fund aims to deliver a sophisticated product; capturing returns from this volatility whilst acting as a portfolio diversifier and helping to manage risk."