Modern & exotic structured products: New trends, ideas ...fs.rts.ru/f/1342/gurbatov.pdf · VIII International Conference, Theory & practice of options trading Modern & exotic structured

VIII International Conference, Theory & practice of options trading

Modern & exotic structured products: New trends, ideas,

marketing, sales technologies

For professional investors only

Nikolay Gurbatov, Head of Russia & CIS Coverage, Equities & Derivatives

Tel.: +44 20 7595 [email protected]

Kiev, 04.06.11

2

Excellence in key areas for a global recognition

Structured Products

� Structured Products House of the Year 2011 (Risk Awards)

� Excellence in Structured Products 2010 #1 (Risk Italia)

� Index Innovation of the Year 2009 (Structured Products Americas)

Flow Solutions

� #1 Swaps and Options on Dividends (Greenwich Associates

Europe 2010 report)

� #1 “Vanilla” Dispersion/Correlation Trades and “Lite Exotics”/

Structured Flow Options (Greenwich Associates Europe 2010

report)

� #2 OTC Single Stock Equity Options in Europe

(Risk Interdealer Rankings 2010)

� #2 Market maker overall for Volatility/Variance Swaps

(Risk Interdealer Rankings 2010)

Commodity

Derivatives

� Excellence in Energy Markets 2010 (Commodity Business

Awards)

� Emissions Europe House of the Year 2010 (Energy Risk)

Risk Expert

� Most innovative in Risk Management 2009 (The Banker)

� #1 Best Protected Capital Certificate (Italian Certificate Awards

2010)

Solutions Provider

� Best Equity Structured Product 2010 for Super Sprinter (Finance

Asia)

� Gold Award for Innovation –Equity Retail- 2010 (AGEFI)

� Excellence in Social Responsibility 2010

(Commodity Business Awards)

Excellence in our core activities Global recognition

Best Equity Derivatives House 2010 (Euromoney)

Best Derivative House 2010-Institutional

(The Asset Triple A Investment Awards)


3

� Marketing Support Services – Closer Integration with Distributors

� BNP Paribas can provide Backtesting Analysis on the proposed structures

� BNP Paribas can provide Research Orientated Marketing Material to support your Sales Force

� BNP Paribas can organise Training sessions for your Sales Force : product mechanisms, selling points...

� Valuations and Secondary Market – Closer to the Markets

� BNP Paribas provides you with daily valuations of your structured products - internet, Reuters or via e-mail

� Real Time valuations and your entire portfolio simulation are available at any time on a special website via your personalised “Open Book” access

� BNP Paribas has a strong commitment to facilitate your Secondary Market Trades, with a limited bid-offer spread of

no more than 1% and no limit on size

� Distribution, Ideas and Trends

� Local regulations – e.g. notes/options wrapped in certificates compliant with Russian legislation, Shari’ah compliant

investments

� Bancassurance distribution, regular premium products

� Thematic ideas (emerging markets, volatility), proprietary indices (GURU, inflation)

� Fund Derivatives

Structured Products with BNP Paribas: Marketing, new trends and ideasFor professional investors only

4

Structured Products with BNP Paribas: Marketing, new trends and ideas

Ma

cro

Inve

stm

en

tR

isk

sGrowth is now well established

Appetite for

Risky Assets

Sovereign risk in Southern Europe following BCE rate hikes

Hyper-Inflation in Emerging Countries

Inflation is back

India (2010) UK (2010)

Liquidity is still there, with:

� “Cheap Dollars”,

� “Very Cheap Yen”,

� “Petro Dollars”…

Stagflationin Developed Countries

and / or

Emerging Markets

Volatility as an asset class

Inflation as an asset class

1

2

3

Forward estimation on BCE rates:

2.5% by end 2012

Illustration: GDP growth Illustration: Inflation rates

Illustration: inflation vs. GDP growth

*Source: Exane BNP Paribas, January 2011

Source: Exane BNP Paribas, January 2011

-1

0

1

2

3

4

5

6

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 201301234567

2008 2009 2010 2011

Estimates Exane BNP Paribas

9.17% 9.10%

0%2%4%6%8%10%

Inflation GDP

10%

3.70%

1.30%

0%2%4%6%8%

Inflation GDP

Rate (%)


5

Market Parameters

I. Low Interest Rates II. Equity Market in a Trading Range

Source: Bloomberg, 29 April 2011

1500

2000

2500

3000

3500

4000

4500

5000

Jan-

08Ap

r-08

Jul-0

8Oct-

08Ja

n-09

Apr-0

9

Jul-0

9Oct-

09Ja

n-10

Apr-1

0

Jul-1

0Oct-

10Ja

n-11

Apr-1

1

Euro Stoxx 50

0%

1%

2%

3%

4%

5%

6%

Jan-

08Ap

r-08

Jul-0

8Oct-

08Ja

n-09

Apr-0

9

Jul-0

9Oct-

09Ja

n-10

Apr-1

0

Jul-1

0Oct-

10Ja

n-11

Apr-1

1

5Y Annual EUR Swap Rates Spot 1Y YTD

3.02% 0.70% 0.53%

Spot 1Y YTD

3011.25 6.90% 7.82%

III. 1 Y Implied Volatility (SX5E) IV. 3M Realised Correlation (SX5E Top 20)

15

20

25

30

35

40

45

50

55

Jan-

08Ap

r-08

Jul-0

8O

ct-08

Jan-

09Ap

r-09

Jul-0

9O

ct-09

Jan-

10Ap

r-10

Jul-1

0O

ct-10

Jan-

11Ap

r-11

1Y Implied Volatility Spot 1Y YTD

24.23% -5.19% -5.46

0.0

0.2

0.4

0.6

0.8

1.0Ja

n-08

Apr-0

8

Jul-0

8Oct-

08Ja

n-09

Apr-0

9

Jul-0

9Oct-

09Ja

n-10

Apr-1

0

Jul-1

0Oct-

10Ja

n-11

Apr-1

1

3M Correlation (SX5E Top 20)Spot 1Y YTD

0.47% -0.13% -0.06%


6

Emerging in Global Offer

ThematicGeographic

focused

Hidden

Asset

Equities Alternative

Algorithm

Index Providers

CIB

Brokers3rd

Party AMs(BNP

PAM,

THEAM,

FundQues

t, Innocap)

Beta +

Market Access

Direct

Invest-

ment

Funds

Direct Invest-ment

Funds

ASSET CLASS

PORTFOLIO MANAGER

Portfolio

constituents

Guru Asia

Guru Emerging

EmergingInfrastructure IndexChinese ConsumerBasketEmerging exposurebasket

EmergingConsumer Index

Hidden

Asset

Multi Asset

Alternative

Absolute Return

Money market / Bonds / FX

Commodities� Exposure to emerging markets via equity and

bond markets

� volatility control mechanism which seeks to limit volatility to 10%

� Annualised return: 17,16%

0

100

200

300

400

Feb-03 Mar-04 Apr-05 May-06 Jun-07 Jul-08 Aug-09 Sep-10

BNP PARIBAS Emerging Markets Debt & Equity Funds Index (USD)

EM Square: Emerging markets Debt & EquityFunds index

� Next 11 Core 8 Index

S&P BRIC vol controlled

� EM Square

� Russian Funds Index

� Africa Funds Index

� Emerging Europe ex Russia Index

� LATAM Equity Funds Index

� Asean Core Equity Funds Index

� Northern Asia Equity Funds Index

� Chindia Equity Funds Index


7

� The Russian theme benefits from several strong drivers among which a few stand out:

� Russia has more natural resources than any other country (20% of oil worldwide, 35% of gas).

� With the largest population in Europe and a rapidly growing middle class, Russian consumption actually became a driver for global growth.

� Many upcoming major sports events (Olympics 2014 and World Cup 2018) make the case for multiple large infrastructure investments.

� Based on these outstanding fundamentals, BNP Paribas built the Russian Funds Index.

� BNP Paribas selects and weighs funds within the Rusian funds' universe based on their managers' consistent outperformance and market expertise.

� BNPP Russian Funds Index has been generating stellar returns since inception. The index is up +8.72% YTD and has returned in excess of 30% since January 2010!

BNP Paribas Russian Funds Index

Investment objective: Gain exposure to a selection of mutual funds with a strong exposure to Russian growth

Emerging markets may provide the bulk of world economic in the future

Growth perspective for Russia

Exposure to an optimal selection of mutual funds with exposure to the strong potential of Russia


8

Index composition

BNP Paribas Russian Funds Index

Sources: BNP Paribas, Bloomberg as of 31st December 2010.


9

3-year RUB Certificate linked to BNP Paribas Russian Funds Index

Key Features

Sources: BNP Paribas, Bloomberg as of 28th February 2011. Performances of the BNP Paribas Russian

Funds Index are stated as Excess Return (i.e. computed in excess of the risk-free rate), in USD.

Performance and composition simulations based on proforma data over the 1st July 2002 and 4th January

2011 period. Past performance is not necessarily a guide to future performance.

Payoff at maturity Underlying Performance

� Investment objective: Benefit from the exposure to BNP

Paribas Russian Funds Index with 100% capital protection at

maturity

� Maturity: 3 Years

� Currency: RUB

� Underlying: BNP Paribas Russian Funds Index (Bloomberg:

BNPIRUUE Index)

� Format: Certificate

� Capital Protection: 100%

� At maturity investors receive

� 80% of the index underlying performance

� 100% of the initially invested capital

� Simulated Historical Performance of BNP Paribas Russian Funds

Index

Maturity

Protection 100%

Strategy Bearish

Return

Risk Low

1 Year and less 3 Years 5 Years

Partial Conditional None

Medium High Very High

Bullish

Coupon Capital Gain

Moderately

BearishFlat


10

� OPPORTUNITIES OFFERED BY EMERGING COUNTRIES

� Strong growth potential

� Sustainable economic dynamism

� ...driven by a rising domestic consumption

� ...and supported by a stable macroeconomic environment

� BNP PARIBAS Emerging Markets Debt & Equity Funds Index

� Exposure to emerging markets via equity and bond markets

� Equity markets: investment opportunities in emerging countries

� Bond markets: attractive yields, higher than in developed countries

� Index is composed of 10 internationally recognized underlying Funds

� 5 Equity Funds of firms located in emerging countries, or with significant exposure to these markets,

� 5 Bond Funds (in local currency)

� It benefits from indirect dynamic management: while the composition of the index is fixed, the underlying funds are actively managed and their composition is adapted to market conditions or fund managers’ expectations

� The index includes a volatility control mechanism which seeks to limit volatility to 10%

BNP Paribas Emerging Markets Debt & Equity Funds

Investment objective: Benefit from emerging countries growth potential via a selection of funds with strong exposure to these markets

50%

100%

150%

200%

250%

300%

350%

400%

07/02

/2003

07/06

/2003

07/10

/2003

07/02

/2004

07/06

/2004

07/10

/2004

07/02

/2005

07/06

/2005

07/10

/2005

07/02

/2006

07/06

/2006

07/10

/2006

07/02

/2007

07/06

/2007

07/10

/2007

07/02

/2008

07/06

/2008

07/10

/2008

07/02

/2009

07/06

/2009

07/10

/2009

07/02

/2010

07/06

/2010

07/10

/2010

WIG20 Index

BNP PARIBAS Emerging Markets Debt & Equity Funds Index -

BNPIEMEE Index

Bond Funds ISIN Morningstar

Goldman Sachs Funds Global Emerging Markets Debt Local Portfolio LU0302283246 ***

Schroder ISF Emerging Markets Debt Absolute Return LU0106253197 ***

BNY Mellon Global Funds Emerging Markets Debt Local Currency IE00B11YFM47 ***

BNP Paribas L1 Bond World Emerging Local LU0251280011 ****

BlackRock Global Funds – Local Emerging Markets Short Duration Bond LU0278470058 **

Equity Funds ISIN Morningstar

Comgest Magellan FR0000292278 *****

Aberdeen Global Emerging Markets Equity Fund LU0132412106 *****

Aberdeen Global Asia Pacific Equity LU0011963245 *****

Baring Global Emerging Markets Fund IE0000838304 ****

Parvest Equity Latin America LU0075933415 ***

Annualized Return Volatility Sharpe Ratio

BNPIEMEE Index 17.21% 9.82% 1.75


11

Certificates linked to BNP Paribas Emerging Markets Debt & Equity Funds Index

Key Features

Payoff at maturity

� Investment objective: Benefit from the exposure to BNP

Paribas Russian Funds Index with 100% capital protection at

maturity

� Maturity: 3 Years

� Currency: RUB

� Underlying: BNP Paribas Russian Funds Index (Bloomberg:

BNPIRUUE Index)

� Format: Certificate

� Capital Protection: 100%

� Performance of the Underlying Index is observed at relevant quarterly observation date and compared to the Strike level

� If the performance of the Underlying Index is positive at relevant quarterly observation date, such a performance is taken into account for

calculation of the average performance of the Underlying Index at maturity

� At maturity, the Investor benefits from averaged performance of the Underlying Index observed at relevant quarterly observation dates, with

global floor at zero, in addition to the 100% of the initially invested capital

Maturity

Protection 100%

Strategy Bearish

Return

Risk Low

1 Year and less 3 Years 5 Years

Partial Conditional None

Medium High Very High

Bullish

Coupon Capital Gain

Moderately

BearishFlat

1-year Maturity

Indicative Payoff at maturity: At maturity investors receive 100% of the Quarterly

Asian Performance in addition to the 100% of the initially invested capital

2-year Maturity

Indicative Payoff at maturity: At maturity investors receive 150% of the Quarterly

Asian Performance in addition to the 100% of the initially invested capital

4-year Maturity

Indicative Payoff at maturity: At maturity investors receive 200% of the Asian-Out

Performance (Quarterly Asianing in the last 2 years) in addition to the 100% of the

initially invested capital


12

� Internal consumption is being supported by dynamic demographics and rising per capita income

� A high and growing number of consumers: by 2030 more than 1bn people to join the ever expanding middle class

Emerging growth: driven by domestic consumption

Income per capita from 1841 to 2014 (projections) – logarithmic scale

100

1 0

00

10 0

00

100 0

00

1820 1840 1860 1880 1900 1920 1940 1960 1980 2000 2020

United States

United Kingdom

Japan

South Korea

China

India

Income GrowthAccelerating

USA : 309 Million Inhabitants (2010)

China : 1.36 Billion Inhabitants (2010)

Inco

me

Pe

rC

ap

ita

(US

D)

100

1 0

00

10 0

00

100 0

00

1820 1840 1860 1880 1900 1920 1940 1960 1980 2000 2020

100

1 0

00

10 0

00

100 0

00

1820 1840 1860 1880 1900 1920 1940 1960 1980 2000 2020

United States

United Kingdom

Japan

South Korea

China

India

Income GrowthAccelerating

USA : 309 Million Inhabitants (2010)

China : 1.36 Billion Inhabitants (2010)

Inco

me

Pe

rC

ap

ita

(US

D)

Source: www.gapminder.org (data from iMF), September 2010


13

� Scenario 1: The emerging Indices outperformed all the developed ones by more than 20%

Sample EM product – 18-month investment illustrative market scenarios(1)

At maturity: all the Emerging Indices outperformed all the

Developed ones by more than 20%:

� Investors receive:

100% of their initial investment(2)

+ a 27.50% coupon

40

80

100

120

140

Bo Developed

Indices

Wo Emerging

Indices

60

18 Months

Indices Level

Wo-Bo >20%

� Scenario 2: The emerging Indices outperformed all the developed ones by less than 20%

At maturity: all the Emerging Indices outperformed all the

Developed ones by less than 20%:

� Investors receive:

100% of their initial investment(2)

+ a 2.50% coupon

40

80

100

120

140

Bo Developed Indices

Wo Emerging Indices

60

18 Months

Indices Level

Wo-Bo > 0% but <20%

� Scenario 3: Not all the emerging Indices outperformed all the developed ones

At maturity: at least one of the emerging indices

underperformed one of the Developed Indices:

� Investors receive 100% of their initial investment(2)

Bo Developed Indices

40

80

100

120

140

18 Months

Wo Emerging

Indices

Wo-Bo < 0%

60

Indices Level

(1)For illustrative purposes only

(2) Except in the event of bankruptcy or default of payment by the Issuer or Guarantor


14

Volatility: The only truly anti-correlated asset class

Many asset classes show negative correlation with volatility*

*Source: Bloomberg, BNP Paribas. Data from 6th August 2004 to 29th April 2011. The above graph shows the 1-year correlation of the 3-month Variance of the SPX Index the SPX index, SX5E Index, HSI Index, DJUSRE

Equity, USL3TR Index, DJUBS Index. Past performance is not indicative of future performance

-1.0

-0.8

-0.6

-0.4

-0.2

0.0

0.2

0.4

2004 2005 2006 2007 2008 2009 2010

US Equities

European Equities

Hong Kong Equities

US Real Estate

Credit

Commodities

Correlation


15

� Vol Edge is an FCP Fund (“the Fund”) indexed to the short-term Forward Implied Volatility of the EuroSTOXX50 and the S&P 500, measured via the “VSTOXX” and the “VIX” Index series

� The Fund offers exposure to Forward Implied Volatility through swaps redeeming the respective ratio of the value of the VStoxx and the VIX index (squared) to a strike level (squared)

� These contracts are rolled on a regular basis (roll costs or gains may arise in case of a distortion of the volatility forward curve)

� No carry costs (but possible roll cost)

� Pure exposure to Implied Volatility

� Excellent reactivity to sudden market drops

VolEdge – BNP Paribas solution

Source: Bloomberg, BNP Paribas. *Data over the period from 28/02/2007 to 29/04/2011, net of management fees. Past performance is not indicative of future performance.

Vol Edge 6M implied volatility (VSTOXX)

Strongly correlated to the 6-month Implied

Volatility of the EuroSTOXX 50* Index:

79%

0

2000

4000

6000

8000

10000

12000

Feb-07

Apr-0

7Ju

n-07

Aug-0

7O

ct-0

7D

ec-0

7Feb-

08Apr

-08

Jun-

08Aug

-08

Oct

-08

Dec

-08

Feb-09

Apr-0

9Ju

n-09

Aug-0

9O

ct-0

9D

ec-0

9Feb-

10Apr

-10

Jun-

10Aug

-10

Oct

-10

Dec

-10

Feb-11

Apr-1

1

0

10

20

30

40

50

60

70

Vol Edge - A Share (Left)

6 Month implied Volatility (Right)


16

� Strongly decorrelated to the Euro STOXX 50 Index* : -61%

Vol Edge – Negative correlation to the stock market

*Source: Bloomberg, BNP Paribas. *Data over the period from 28/02/2007 to 29/04/2011, net of management fees. Past performance is not a reliable indicator of future results. ** Example for illustrative purposes only.

Observation on the 01/04/2009 to 30/06/2009 period. Past performance is not a reliable indicator of future results

Vol Edge EuroSTOXX 50

1

0

2400

4800

7200

9600

Feb-07

Apr-0

7Ju

n-07

Aug-0

7O

ct-0

7D

ec-0

7Feb-

08Apr

-08

Jun-

08Aug

-08

Oct

-08

Dec

-08

Feb-09

Apr-0

9Ju

n-09

Aug-0

9O

ct-0

9D

ec-0

9Feb-

10Apr

-10

Jun-

10Aug

-10

Oct

-10

Dec

-10

Feb-11

Apr-1

1

1600

2000

2400

2800

3200

3600

4000

4400

4800

Vol Edge - A Share (Left)

EURO STOXX 50 (Right)

� Good reactivity when markets drops

Performance Vol Edge EuroSTOXX 50

1 : July 07/August 07 39.79% -4.35%

2 : January 08/February 08 26.27% -15.35%

3 : September 08/November 08 422.57% -27.79%

� Equally strong reactivity when markets rise (i.e.: -46.3% for Vol Edge from April to June 2009 while the EuroSTOXX 50 made +16.8% ) making Vol Edge a tactical investment solution**

2 3


17

� Access to a wide range of underlyings

� Large choice of underlyings (stocks, commodities, multi-assets, alternative assets)

� Access to different geographic areas

� Different versions available for most of our indices (Total return, excess return, price return…)

� Large variety of optional features on those versions (volatility control mechanism, FX hedging…)

� Transparency

� Systematic management process

� Fully disclosed methodology

� Risk control

� Cautious implementation

� Regular rebalancing so the investment evolves with the market

� Volatility control mechanism integrated into several of our indices

BNP Paribas indices – Philosophy

Our indices aim to provide innovative performance engines with diversity, transparency & risk control:


18

Overview of BNP Paribas Range of Indices

Investment ProfileAsset Class

Commodities

DCI Enhanced Agriculture Beta

DCI Enhanced Energy Beta

DCI Enhanced Global Beta

DCI Enhanced Metals Beta

DCI Enhanced Precious Metal Beta

BNP Paribas COMAC Enhanced Beta

Oscillator Commodities Enhanced Beta

BNP Paribas COMAC IsoVol8 Long Short Enhanced Beta

BNP Paribas COMAC Long Short Alpha

Millenium Commodities Alpha

Alternative

SALTO Beta

VERSO Beta

ACTION CTA Alpha

Investment ProfileAsset Class

Equities

Global Energy Efficiency Beta

Ethibel Vigeo Pioneer Titans 15 Beta

Global Agribusiness Beta

Global Grey Gold Beta

Global Renewable Energies Beta

Global Waste Management Beta

Global Water Beta

Next 11 Core 8 Beta

Global Rare Earth Beta

Global Green Beta

Emerging Infrastructure Enhanced Beta

Global Infrastructure Enhanced Beta

GURU Equity Europe Enhanced Beta

GURU Equity US Enhanced Beta

Key ideas stock performance selection Enhanced Beta

M&A Europe Enhanced Beta

Europe Select Plus Enhanced Beta

US Select Plus Enhanced Beta

Spectrum US sector momentum Enhanced Beta

FlexInvest Europe Enhanced Beta

FlexInvest US Enhanced Beta

FlexInvest BRIC Enhanced Beta

Emerging Consumer Enhanced Beta

High Dividend Yield Enhanced Beta

Russian Funds Enhanced Beta

GURU Long Short Europe Alpha

GURU Long Short US Alpha

Growth vs Value Europe Alpha

Spectrum long/short Alpha

Echo Alpha

Multi-Asset

Emerging Markets Debt & Equity Funds Enhanced Beta

Millenium 10 Alpha

Millenium 10 Series 3 Alpha

Millenium 10 Series 3 (Sterling Hedged) Alpha

Millenium Japan 10 Alpha

Millenium Masters Series Alpha

Millenium Multi-Asset Dynamic Alpha

Millenium New World Alpha

New Frontier 5 Social Alpha

New Frontier 8 Alpha

Platinium Alpha

Platinium Series 2 Alpha

Maars Alpha

Longitude Alpha


19

� Index component selection using fundamental criteria and a reshuffle based on a systematic process

� Universe of liquid European Equities

GURU Equity Europe

To view the disclaimer for this index, please go to the related index page on www.bnpparibasindex.com

Top 20 index components by weight* Index Performance Vs Benchmark

Total Return index Quoted in EURBloomberg:<BNPGELTR Index>

Type Reshuffle

Frequency: Monthly

* As of last reshuffle on 31/3/2011, Market Capitalisation as of 31/3/2011

Data based on historical data since 31/12/2008 calculated in EUR on a total return basis

Source: Bloomberg as of 31/3/2011

Past performance is not a reliable indicator of future results.

Company Name ISIN CountryMKT Cap

(EURm)*Weight

1 BASF SE DE000BASF111 Germany 56,146.60 3.43%

2 ATLAS COPCO AB-A SHS SE0000101032 Sweden 22,385.52 3.16%

3 CLARIANT AG-REG CH0012142631 Switzerland 2,934.74 2.83%

4 SKF AB-B SHARES SE0000108227 Sweden 9,352.62 2.67%

5 STATOIL ASA NO0010096985 Norway 62,325.39 2.64%

6 RIO TINTO PLC GB0007188757 Britain 102,022.09 2.55%

7 CHRISTIAN DIOR FR0000130403 France 18,050.95 2.41%

8 K+S AG DE0007162000 Germany 10,237.99 2.32%

9 VOLVO AB-B SHS SE0000115446 Sweden 26,360.65 2.32%

10 ANGLO AMERICAN PLC GB00B1XZS820 Britain 47,985.40 2.25%

11 PETROFAC LTD GB00B0H2K534 Britain 5,827.53 2.18%

12 CONTINENTAL AG DE0005439004 Germany 12,726.38 2.04%

13 SCANIA AB-B SHS SE0000308280 Sweden 12,993.58 2.03%

14 PUBLICIS GROUPE FR0000130577 France 7,584.36 2.00%

15 NOVO NORDISK A/S-B DK0060102614 Denmark 53,192.61 2.00%

16 ENI SPA IT0003132476 Italy 69,412.87 1.94%

17 ASTRAZENECA PLC GB0009895292 Britain 44,856.23 1.84%

18 SHIRE PLC JE00B2QKY057 Ireland 11,526.70 1.77%

19 ASSA ABLOY AB-B SE0000255648 Sweden 7,439.83 1.74%

20 BAYERISCHE MOTOREN WERKE AG DE0005190003 Germany 37,479.46 1.66%

50

250

450

650

850

1050

1250

1450

Jan 95 Jan 97 Jan 99 Jan 01 Jan 03 Jan 05 Jan 07 Jan 09 Jan 11

GURU Equity Europe STOXX 600 TR STOXX 50 TR


20

� An equity index strategy measuring the performance spread between long and short positions on various

liquid North American stocks

� The index composition stems from a simple, transparent and systematic selection method based on the analysis of the firms’ fundamentals

GURU Long Short US


Top 20 index components by weight* Index Performance Vs Benchmark

Total Return index Quoted in USDBloomberg:<BNPGULST Index>Excess Return index Quoted in USDBloomberg:<BNPGULSE Index>

Type Reshuffle

Frequency: Monthly

Data based on historical simulations from 01/01/1995 to 31/12/2008 calculated in USD on a total return basis


Past performance is not a reliable indicator of future results.

* As of last reshuffle on 31/1/2011

0

100

200

300

400

500

600

700

800

Jan 95 Jan 97 Jan 99 Jan 01 Jan 03 Jan 05 Jan 07 Jan 09 Jan 11

GURU Long Short US S&P 500 TR

Long portfolio

Short portfolio

Company Name Country Weight

1 LIMITED BRANDS INC United States 2.25%

2 TEMPUR-PEDIC INTERNATIONAL United States 1.85%

3 HERBALIFE LTD Cayman Islands 1.84%

4 OSHKOSH CORP United States 1.81%

5 CUMMINS INC United States 1.79%

6 NAVISTAR INTERNATIONAL CORP United States 1.73%

7 UNION PACIFIC CORP United States 1.73%

8 HASBRO INC United States 1.60%

9 HUMANA INC United States 1.38%

10 AUTOLIV INC Sweden 1.31%

Company Name Country Weight

1 NORTHERN TRUST CORP United States 2.52%

2 HUDSON CITY BANCORP INC United States 2.41%

3 VERTEX PHARMACEUTICALS INC United States 2.30%

4 NUCOR CORP United States 2.11%

5 CINCINNATI FINANCIAL CORP United States 2.05%

6 ALCOA INC United States 1.96%

7 CROWN CASTLE INTL CORP United States 1.94%

8 WILLIAMS COS INC United States 1.81%

9 SCHWAB (CHARLES) CORP United States 1.71%

10 VULCAN MATERIALS CO United States 1.67%


21

An innovative and efficient approach to invest or hedge inflation going forward

Back to Inflation: BNP Paribas Millenium Inflation Index

Performance: BNP Paribas Millennium Inflation Index vs BarCap Index

Sources: Bloomberg February 2011

80

100

120

140

160

180

200

Oct-05 May-06 Dec-06 Jul-07 Feb-08 Sep-08 Apr-09 Nov-09 Jul-10 Feb-11

BNP Paribas Millennium 10 ER IndexBNP Paribas Millennium 5 ER Index

Barclays World Inflation Markets Index

1. Multi sources of inflation: excess of money, excess of

demand, cost increase, anticipations

2. Multi impacts: peaks in commodities prices, positive or

negative impact on bonds, stocks, real assets

Use a dynamic multi-asset approach to better address inflation *Source: Exane BNP Paribas, January 2011

0

1

2

3

4

5

6

7

2008 2009 2010 2011

Rise in inflation rates:

Rate (%)

Our Competitors

� Better performance

� Main competitors:

Barcap World Inflation Bonds

Mediolanum PIMCO Inflation

Axa Global Inflation Bonds


22

Why invest in Commodities?

� A risk profile similar to equity

� Return and volatility close to that of Equity

1970 - 2004 US Equity US Bonds US Inflation

Correlation -24% -32% 29%

1970 - 2004 US Equity US Bonds Commodities

Return 11.2 8.7 12.4

Volatility 17.2 7.1 19.9

Source: Yale ICF Working Paper No. 4-20, Ibbotson Associates Strategic Allocation and Commodities

� Optimal allocation for a conservative portfolio:

� 9 to 13 % of commodities (Source: Ibbotson Associate)

� Diversify stocks & bonds portfolios

� Decorrelated from stocks and bonds

� Hedge against inflation

� Commodities significantly outperform when financial portfolio needs diversification most

� From Jan 95 to Dec 09, the S&P GSCI has posted +11% average quarterly performance during the 10% worst quarterly performance for the 80% Bond / 20% Equity Portfolio

Out performance of Commodities amid negative performance of Equities and Bonds

10% worst quaterly

perf jan 95 - june 09

Average

quarterly perf

Annualised

quartely perf

Portfolio -2% -8%

S&P 500 -1% -4%

EFFAS Bond Index -

US Liquid All-2% -9%

S&P GSCI 11% 51%

-4% -2% 0% 2% 4% 6% 8% 10% 12%

Portfolio

S&P 500

EFFAS Bond Index -

US Liquid All

S&P GSCI

Source: BNP Paribas

Portfolio perf = 80% USLATR perf + 20% SP500 perf


23

� An agricultural commodity index displaying broad diversification and algorithmic forward curve enhancement created with Diapason Commodities Management S.A.

� Diversification through the 24 components of Diapason’s DCI® Agriculture Index

� Outperforms most existing agri-commodity indices thanks to BNP Paribas’ innovative algorithm that optimises the roll of commodity futures and aims to provide a steady additional return and to reduce volatility

DCI® Enhanced Agriculture


Index components* Index Performance Vs Benchmark

Total Return index Quoted in USDBloomberg:<DCIBAGTR Index>Excess Return index Quoted in USDBloomberg:<DCIBAGER Index>

Type Reshuffle

Frequency: Monthly

Data based on historical performance since 31/07/1998 calculated in USD on a total return basis


Past performance is not a reliable indicator of future results.* As of last reshuffle on 30/09/2009

Commodity Name Weight

1 Corn 13.15%

2 Soybeans 11.02%

3 Lumber 9.64%

4 Wheat 8.40%

5 Sugar 6.26%

6 Live Cattle 5.55%

7 Coffee 5.22%

8 Cotton 4.59%

9 KCBT Wheat 4.57%

10 Soybean Meal 4.47%

11 Soybean Oil 3.69%

12 Lean Hogs 3.20%

13 Cocoa 2.73%

14 Rubber 2.34%

15 Rice 2.26%

16 Feeder Cattle 2.18%

Other 10.73%

0

20

40

60

80

100

120

140

160

Jul 98 Feb 00 Sep 01 Apr 03 Nov 04 Jun 06 Jan 08 Aug 09 Mar 11

DCI Enhanced Agriculture S&P GSCI Agriculture DJUBS Agriculture


24

Reduce lock-up period with a larger upfront premium

Bancassurance – How to Build Equity Exposure through Regular Payments

1 Except in the event of bankruptcy on the part of BNP Paribas (AA/Aa2/AA-)

Standard BNP Paribas Regular Premium

Payment Schemes:

Regular Premium with Larger Upfront Premium

Payment 1Payment 2

Regular Payments = 90% of the capital

Payment 3Payment 4

Payment 5 …Payment 6

Initial premium

= 10% of the Capital

Maturity

100% of the Nominal

Index Level

0%

Full pay-off of the underlying

performance(%) x Capital

Sum of the protected premiums

= 100% Capital1

Pay-off at maturity

� Investors pay equal monthly instalments throughout the

term of the investment

� Advantage: Investors do not have a large upfront

payment and pay in even instalments over the life of

the investment

� Disadvantage: The insurance company cannot offset

any surrender values during the lock-up period (usually 2 to 3 years)

� Investors pay a larger first payment (e.g. 10% – 20%) and smaller regular premiums thereafter

� Advantage: No lock-up period required, therefore

surrenders possible on a daily basis at the relevant Mark-

to-Market value floored at 0

� Disadvantage: Investors need to pay a larger first

premium in order to participate in the insurance

� E.G. For a €1000 plan paid over 120 months with

10% initial payment: The investors pays €100 in the first month and then €7.56 per month over the 119 remaining months


25

This document is CONFIDENTIAL AND FOR DISCUSSION PURPOSES ONLY and has been prepared for professional investors by a Sales and Marketing

function within BNP Paribas SA, London Branch ("BNPP"). This document does not constitute an offer or a solicitation to engage in any trading strategy or the

purchase or sale of any financial instruments. Given its general nature, the information included in this document does not contain all the elements that may be

relevant for a recipient to make an informed decision in relation to any strategies or financial products discussed herein.

The information and opinions contained in this document have been obtained from sources believed to be reliable, but BNPP makes no representation, express or

implied that that such information is accurate or complete. Other financial institutions or persons may have different views or draw different conclusions from the

same facts or ideas analysed in this document. Any scenarios, assumptions, historical performances, indicative prices or examples of potential transactions or

returns are included for illustrative purposes only, and we can give no assurance that any favourable scenarios are likely to happen, that it is possible to trade on

those terms or that any potential returns can be achieved.

BNP Paribas is not provided recipients of this document with financial legal, tax or any other type of advice. Certain strategies or potential transactions discussed in

this document involve the use of derivatives, which are complex in nature and give rise to substantial risk, including the risk of total loss of any investment.

Addressees of this document must understand and agree that BNPP is not in a position to assess whether any of the strategies discussed herein may be suitable

for their financial needs, circumstances or requirements. Addressees must independently make such suitability assessment, using such professional advisors as

they make require. BNPP can therefore not accept any liability for any direct or consequential losses arising from any action taken in connection with the information

contained in this document.

As an investment bank with a wide range of activities, BNPP may face conflicts of interest, which are resolved under legal provisions and internal guidelines. You

should be aware, however, that BNPP may engage in transactions in a manner inconsistent with the views expressed in this document, either for its own account of

for the account of its clients.

By accepting this document you agree to be bound by the foregoing limitations.

This document is prepared for eligible counterparties and professional clients only, it is not intended for retail clients (as such terms are defined in the Markets in

Financial Instruments Directive 2004/39/EC (“MiFID”)), and should not be circulated to any such retail clients.

© BNP Paribas (2011). All rights reserved. BNP Paribas London Branch (registered office 10 Harewood Avenue, London NW1 6AA; tel: [44 20] 7595 2000; fax: [44

20] 7595 2555) is authorised and supervised by the Autorité de Contrôle Prudentiel and it is authorised and subject to limited regulation by the Financial Services

Authority. Details of the extent of our authorisation and regulation by the Financial Services Authority are available from us on request. BNP Paribas London Branch

is registered in England and Wales under no. FC13447. www.bnpparibas.com

DisclaimerFor professional investors only

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