Dynamic Tracker Securities CLS Winter Conference 2014

Dynamic tracker securities 2  Bespoke ETF like securities that allow you the discretionary to change the composition of the underlying investments exposure.  Can be linked to stocks, bonds, mutual funds, dividend futures…..combination of and hedge overlays.  Like a fund, whilst the underlying investment exposure changes, based upon you the discretionary ’s instructions, the security that investors hold remains the same.  Unlike a fund, the costs and size constraints of issuing such a security are significantly lower with denominations down to £1.  There are advantageous tax benefits to executing stock strategies in this manner rather than as direct investments or via a fund.  You are accessing bank’s global execution and custody platforms. If they can trade and settle it, you can access it.

How do they work? 3 Issuer Security Basket Returns Stock Basket Bank physically purchases stock as a hedge Asset construction Basket Returns

How do they work? 4 Issuer Security Revised Basket Returns Stock Basket Bank adjusts its physical stock holding, based upon instructions Asset construction Revised Basket Returns Discretionary Revised basket composition instructions

Dynamic tracker securities in numbers 5

Benefits of and to whom? 6 End Investor  Lower TER  Access BPS style stock picking  Tax efficient  Potentially access new stocks Portfolio Manager  Lower TER; better performance  Efficient implementation of BPS style stock picking  Tax efficient; better performance and can be tailored to each investor  Access to all stocks banks can trade and clear The Firm  Ability to strategically roll out BPS to MPS style clients  Efficiency gains both in terms of both PM and BO time  Potential savings for custody costs and access to new markets

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