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International partners launch first issue on exchange-traded notes platform

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Nuveen Investments, Merrill Lynch, the Swedish Export Credit Corporation and BNP Paribas have unveiled the first issue in the Elements exchange-traded notes platform, which has been launch

Nuveen Investments, Merrill Lynch, the Swedish Export Credit Corporation and BNP Paribas have unveiled the first issue in the Elements exchange-traded notes platform, which has been launched on the New York Stock Exchange.

Elements exchange-traded notes are designed to track the total return of specific market indices and seek to provide convenient access to strategies and markets that traditionally have not been readily available to individual investors. They can be purchased or sold through a broker or financial advisor and are traded on securities exchanges in the same way as equities or exchange-traded funds.

The first product, Elements Linked to the Spectrum Large Cap U.S. Sector Momentum Index, is linked to a proprietary investment strategy known as momentum investing and aims to track the performance of the Spectrum Large Cap US Sector Momentum Index, calculated by BNP Paribas.

The index seeks to take advantage of the varied performances of the 10 sub-indexes of the S&P 500 Total Return Index relative to each other and to the SPTR by applying a momentum investing strategy.

Every day new sector weights are computed in two steps based on performance and correlation. If a sub-index performs better than the SPTR, its relative weight in the Spectrum index will increase, while if it performs worse, its relative weight will decrease. Secondly, if there is high correlation between a sub-index and the SPTR, its relative weight in the Spectrum Index will increase, while a low correlation will cause its weight to decrease.

The notes are issued by the Swedish Export Credit Corporation. ‘Certain strategies are difficult to invest in, in a cost-efficient manner,’ says Per Åkerlind, the organisation’s executive director, chief financial officer and head of capital markets.

‘Elements’ partnering of industry leaders BNP Paribas, Nuveen Investments and Merrill Lynch has created an investment vehicle that provides these opportunities, with exchange-traded flexibility.’

Bill Adams, executive vice-president of Nuveen Investments, says: ‘We believe Elements can provide convenient access to new markets and strategies that are not easily accessible to individual investors and that can enhance portfolio performance and diversification.’

Todd Steinberg, head of equities and derivatives for the Americas at BNP Paribas, says: ‘Linking our Spectrum Index to an Elements exchange-traded note delivers our proprietary alternative investment strategy in an efficient and liquid security.’

Nuveen Investments provides investment services to institutions and high net worth investors and markets its range of specialised investment products under the NWQ, Nuveen, Santa Barbara, Tradewinds, Rittenhouse and Symphony brands. In total, the company managed assets totalling USD172bn at the end of June.

Merrill Lynch is a wealth management, capital markets and advisory group with offices in 37 countries and territories and total client assets of around USD1.7trn, a global trader and underwriter of securities and derivatives across a broad range of asset classes, and a strategic advisor to corporations, governments, institutions and individuals. Merrill Lynch owns about half of BlackRock, which has more than USD1trn in assets under management.

Founded in 1962 and owned by the Swedish state, the Swedish Export Credit Corporation provides access to financing for export and infrastructure, including export credits, lending, structured financing, project financing, leasing, capital markets products and financial advisory services, and issues interest rate, foreign exchange, equity, commodities and credit-linked notes.

BNP Paribas is one of the world’s top 15 banks in terms of market capitalisation and employs some 140,000 people in more than 85 countries, including 15,000 employees in the US.

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