Barclays Plc (BARC) sold $10.4 million of notes tied to the WisdomTree Japan Hedged Equity Fund (DXJ:US), the largest such offering this year.
The three-year securities, issued Oct. 31, yield twice the fund’s gains with returns capped at 42.25 percent, protection against the first 20 percent of declines and all capital at risk, according to a prospectus filed with the U.S. Securities and Exchange Commission. The bank estimated their initial value at 93.71 cents on the dollar.
The fund rose 27 percent this year to 46.87 at the end of trading yesterday. Japan’s gross domestic product grew an annualized 3.8 percent in the second quarter from the first, higher than an initial estimate of 2.6 percent.
Mark Lane, a spokesman for Barclays in New York, declined to comment on the securities.
The WisdomTree fund includes (DXJ:US) companies such as the world’s largest automaker, Toyota Motor Corp. (7203), and largest camera maker, Canon Inc. (7751), according to data compiled by Bloomberg. The ETF tries to hedge against price swings in the value of the U.S. dollar against the Japanese yen, according to the fund’s website.
Investors have bought $61.1 million of notes tied to the ETF this year since April, when UBS AG (UBS:US) first offered such a security, Bloomberg data show. Bloomberg started collecting comprehensive data on U.S. SEC-registered structured notes in 2010.
Japan’s economy will contract an annualized 4 percent in the three months starting April, when the nation’s first sales-tax increase since 1997 takes effect, according to the median estimate of economists surveyed by Bloomberg. Japan’s Prime Minister Shinzo Abe devised a 5 trillion yen ($50.7 billion) reflationary stimulus program last month to cushion the impact.
Banks create structured notes by packaging debt with derivatives to offer customized bets to retail investors while earning fees and raising money. Derivatives are contracts with values derived from stocks, bonds, commodities and currencies, or events such as changes in interest rates or the weather.
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