What are Out-Performance Notes?
Out-performance Notes may be linked to a variety of underlying
assets, but are typically linked to indices or exchange traded
funds. They may be structured around either a ‘positive’
or ‘negative’ view of the future performance of
the underlying asset.
For example, if held to maturity, Out-performance Notes with
a ‘positive view’ give investors an opportunity
to participate in a multiple of any appreciation of an underlying
asset up to a predetermined cap. These are typically short-dated
investments that do not provide for regular coupon payments.
Out-performance Notes are not principal protected; therefore,
100% of an investor’s principal will be at risk. This
means that Investors may lose some or all of their initial investment
in the notes if the underlying asset declines in value (‘positive
Out-performance Notes are a tool for the investor seeking enhanced
returns by taking advantage of short-term market trends. For
example, in a structure with a ‘positive view’,
investors in out-performance notes forgo any appreciation in
the underlying asset above the predetermined cap in order to
benefit from a multiple of the appreciation of the underlying
asset up to such cap. Investors in a ‘positive view’
note also face one-to one downside risk on the underlying asset.
Because of the predetermined cap, investors never receive at
maturity an amount greater than a predetermined amount per note,
regardless of how high or low the price or value of the underlying
asset is during the term of the notes or on the determination