Principal Protected Notes

Guaranteed Absolute Return Notes

Product Summary

Inception Date October 4, 2002
Maturity Date December 17, 2008
Offering Price $10.00
Guarantee Amount $......
Market Price Per Note $......
Investment Exposure as at December 31, 2008 0%

The ONE Financial Guaranteed Absolute Return Notes™ provide Canadian investors with access to a multi-advisor, multi-strategy portfolio of top-performing hedge funds, combined with a 100% capital guarantee. The notes are 100% RRSP eligible, and are designed to perform in all stock market environments, regardless of whether the stock market goes up, down, or sideways. Historical pro-forma average returns on the notes are 14.3% per year.

The Notes provide investors an alternative to traditional stock and income investments, via 100% principal-guaranteed exposure to a multiadvisor, multi-strategy portfolio of experienced hedge fund managers with the potential to provide positive returns in both up and down markets.

  • 100% principal-guarantee at maturity
  • Positive return potential in both up and down markets
  • Access to hedge funds with low $2,000 minimum investment
  • Multi-strategy fund-of-funds offers lower risk and strong portfolio diversification
  • Tax-efficient structure
  • Competitive management fees

Investment Details

Style Hedge Fund / Fund of Funds / Principal-Guaranteed
Underlying investment The Lyxor Absolute Return Managers Fund
Guarantor Société Générale (Rated AA- by S&P)
Administrator ONE Financial
Leveraged return potential Yes, up to 150% "performance-based" investment exposure
Liquidity Weekly
RSP eligibility 100% (Canadian content)
Performance as at December 31, 2008
Returns as at December 31, 2008
1 Month 7.04%
3 Months 3.82%
6 Months 2.20%
Year to Date -0.60%
1 Year -0.60%
3 Year (annualized) -0.50%
5 Year (annualized) 0.40%
Total return since inception 0.00%
Allocation by Strategy as at December 31, 2008
CTAs, Discretionary 0.0%
CTAs, Systematic 0.0%
L/S Equity, Long Bias 0.0%
L/S Equity, Var. Bias 0.0%
L/S Equity, Mkt. Neutral 0.0%
CB Arbitrage, Diversified 0.0%
CB Arb., Credit Focus 0.0%
Fixed Income Arb., MBS 0.0%
Merger Arbitrage 0.0%
Commentary as at December 31, 2008

THE ONE FINANCIAL GUARANTEED Absolute Return Notes (the "Notes") are linked to the performance of the Lyxor Absolute Return Managers Fund (the "Fund"), which decreased by 2.7% over the quarter and has risen 0.5% since inception. This compares to -1.3% for the S&P 500 Index over the same period, and 2.5% for the global stock markets, as represented by the MSCI World Index. Equally as important, however, is the level of volatility incurred by the Fund which affects returns available to investors who may wish to sell their investment prior to maturity. In this respect the Fund has provided much more stable returns than the stock markets, with annual volatility since inception of 3.5%, approximately 1/4 the volatility of the S&P 500 Index and 1/4 the volatility of the MSCI World Index. This can partially be attributed to the fact that the Fund is well diversified across strategies (see chart below), and maintains a broad roster of experienced trading advisors, currently 11 in total. The best returning strategy to date has been "Long/Short Equity", with returns since inception of 15.6%. The Fund has also maintained a very low correlation with the stock markets (0.65 versus the S&P 500 and 0.65 versus the MSCI World Index), thereby providing investors with important diversification benefits for their overall portfolio. The Notes increased 3.8% over the quarter, and returned the principal amount to investors. The price of the Notes prior to maturity will generally not track the performance of the Fund, and is affected by many inter-related factors, including:

  • changes in the level of interest rates,
  • the performance of the Fund,
  • time remaining until the Notes' maturity date,
  • the level of volatility of the underlying Fund, and
  • market demand for the Notes.

The difference between the performance of the Notes and the performance of the Fund to date can partly be attributed to the fact that, being a principal-guaranteed investment, the Notes are highly sensitive to changes in the level of interest rates (especially in the early years following the Notes' inception date). Over time, the impact of interest rates on the market price of the Notes gradually disappears, and investors benefit from the full payoff (in accordance with the terms of the Notes) linked to the performance of the Fund at maturity.

Purchase

This Note has matured.

The Guarantor

Société Générale

Established in 1864, the Société Générale Group is among the largest banks in the world. With assets of more than $700 billion, Société Générale is approximately twice the size of Canada's largest bank. Through its global network of 500 offices in over 75 countries, the Group maintains relationships with 50 multi-national industrial and services groups, 4,000 institutional investors and 1,300 financial institutions.

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