RealEstate

Short Treasuries and Real Estate

What if Real Estate in a Bubble?

Target
✔ hedge against inflation
✔ Interest hikes have a direct impact; how far are hikes priced in the market yet?
✔ US real estate market with first signs of bubble and price melt down
✔ top performing strategy since the start of the year. Historical graph observation still has more room to go.

Descriptive
The strategy aims to benefit from the increase in interest rates. Higher interest rates typically have a negative impact on the real estate market. Demand around real estate depends on the mortgage rates and access to credit financing. The higher the interest rates, the less are the spendings and investments on purchases of home building related goods

Technical composition
Long: Interest yield 20+ years Treasury Bonds (ProShares 20+ Year Treasury ETF, Ticker: TBF)
The index includes publicly-issued U.S. Treasury securities that have a remaining maturity greater than or equal to twenty years and have $ 300 million or more of outstanding debt. The ETF takes a short position in these papers looking to benefit from rising yields.


Short: Real Estate Homebuilders ETF (SPDR S&P Homebuilders ETF, Ticker: XHB) The SPDR S&P Homebuilders ETF seeks to track the performance of the S&P Homebuilders Select Industry Index, which tracks a broad-based, equal-weighted index of US companies involved in the homebuilding industry. It selects US firms by market-cap, then equally weights its components. An approach that results in a portfolio that tilts away from companies that dominate the industry. The index rebalancing occurs quarterly.

The graph below is reflecting the decade of low interest rates giving the boost to the housing sector and home builders, and decrease of Treasuries. At the beginning of 2022 the market started to price in the change of interest policy. As per 2022, we see the trend reversal and the relative growth potential for the strategy.

Targeting of the strategy
The strategy can serve as a hedge against inflation. In the case of a severe market correction the product can deliver superior performance based on historical precedents (i.e March'20). The strategy may be volatile in the near term as long as the market has a positive economic growth context. Target return of the strategy is 50%-100% in the minor correction scenario and 100%+ in the case of more negative developments (inter alia high inflation beyond 8% p.a., recession, market shock due strong and rapid interest rate hike, geopolitical conflicts).

RealEstate
Risk
High
Target return
25-50%
Issue date:
27.12.2021
Strategy
Hedging
Issuer
Leonteq
ISIN
CH0588515194
Lot
1,000 USD
Currency
USD
Redemption
Daily
Status
Open for new investors

Last updated on 31 may 2022 . Daily update on the issuer's website.

Key Figures

Historical graph of Certificate price

Figures for the last monthSince launch
-5.64%+102.26%

Recent Transactions Examples

Instrument PnL Type of Transaction Currency Price Date
1.Tranche Buy USD 36.8 27.12.2021
2.Tranche Buy USD 52.84 04.02.2022
1.Tranche 100% +55.35% Sell USD 57.17 15.03.2022
2.Tranche 100% +34.25% Sell USD 70.94 04.04.2022

Factsheet

Issue date
27.12.2021
Currency
USD
Issuer, Market maker
Leonteq
Subscription fee
2-5%
Redemption fee
0%

Documents

FAQ

What is a Mini-Future and how does the leverage factor work?

A Mini-Future is a derivatives structured product, tracking performance of an underlying set of assets with the applied leverage effect. The leverage factor is identified at the launch of the product and changes accordingly to the price performance of the product. If the price of the product is indicated at $ 50, the product has a leverage factor of 2 (strike price always $ 100 / current price $ 50).

What is a Stop Loss?

In order to control the downside risks, the strategy has implemented a stop loss in the core attributes of the product itself. On an average loss of -50%, the stop-loss is triggered to limit the downside loss. In a stop-loss event, the product is to self-terminate and repay the investor the residual amount.

Why might I be asked to relaunch the strategy?

A strategy is advised to be relaunched in two cases. In case of a stop loss event or in case the price of the structured product reaches $ 100 (the target strike price). The strategy applies a leverage effect calculated as $ 100 divided by the market price. Once the market price is over $ 100, the product is advised to be relaunched as the positive effect of the leverage is to exceed the 1:1 level, and may have a less favorable effect going forward. Example: at a trading price of $ 150, the product would result in a leverage factor of 0.66. That implies that with every $ 1 move of the underlying, the strategy would benefit only by an increase of $ 0.66.

Liquidity and secondary market?

The product has a secondary market allowed to enter at any time if the size conditions are met. Secondary tranche is being sold at the agreed price based on the underlying performance and entry commission. The product has daily liquidity and can be liquidated at fair value at any time.

Why shall I use the product and not enter the pair directly?

The product is a leveraged strategy, including ETFs and Futures. It allows access to each or all strategies with any capital allocation. The strategy developer and sponsor, Grossmeister Capital, is also offering the support in the rebalancing of the strategies. It might be considerable to enter in several tranches, and considering the market condition and strategies development/s to realize profits if the market conditions may indicate a corrective phase.

What are the risks?

The product has the risk of negative performance, up to the extent of an automatic stop-loss event (approximately being triggered on a -50% performance). Further, there is the issuer risk with potential default of its operational service. Each structured product falls into the category of «high risk» products and is designed for qualified investors.

Contacts

To purchase an actively managed certificate Short Treasuries and Real Estate or to ask a question contact us by phone, e-mail, Instagram, Telegram or WhatsApp.