Autocallable notes gaining new fans; Despite upside limits and counterparty risk, guaranteed returns appeal to pension clients.(Investing)

Byline: John D'Antona Jr.

As equity markets trade lower amid inflation fears and rising commodities prices, some pension funds are turning to autocallable notes - structured investments that offer a high fixed rate of return and downside equity market protection.

However, experts say the notes offer limited upside potential and expose buyers to counterparty risk of financial companies whose stocks have been battered lately.

"Pension funds are facing a real challenge to meet their high rate of return targets, so we are working with them to meet their benchmarks,'' said Michael Heraty, managing director in equity derivatives at Merrill Lynch & Co. Inc., New York, and co-architect of the firm's enhanced liquidity note. "Derivatives, including this one, …

Autocallable notes gaining new fans; Despite upside limits and counterparty risk, guaranteed returns appeal to pension clients.(Investing)

Byline: John D'Antona Jr.

As equity markets trade lower amid inflation fears and rising commodities prices, some pension funds are turning to autocallable notes - structured investments that offer a high fixed rate of return and downside equity market protection.

However, experts say the notes offer limited upside potential and expose buyers to counterparty risk of financial companies whose stocks have been battered lately.

"Pension funds are facing a real challenge to meet their high rate of return targets, so we are working with them to meet their benchmarks,'' said Michael Heraty, managing director in equity derivatives at Merrill Lynch & Co. Inc., New York, and co-architect of the firm's enhanced liquidity note. "Derivatives, including this one, …

Autocallable notes gaining new fans; Despite upside limits and counterparty risk, guaranteed returns appeal to pension clients.(Investing)

Byline: John D'Antona Jr.

As equity markets trade lower amid inflation fears and rising commodities prices, some pension funds are turning to autocallable notes - structured investments that offer a high fixed rate of return and downside equity market protection.

However, experts say the notes offer limited upside potential and expose buyers to counterparty risk of financial companies whose stocks have been battered lately.

"Pension funds are facing a real challenge to meet their high rate of return targets, so we are working with them to meet their benchmarks,'' said Michael Heraty, managing director in equity derivatives at Merrill Lynch & Co. Inc., New York, and co-architect of the firm's enhanced liquidity note. "Derivatives, including this one, …

Autocallable notes gaining new fans; Despite upside limits and counterparty risk, guaranteed returns appeal to pension clients.(Investing)

Byline: John D'Antona Jr.

As equity markets trade lower amid inflation fears and rising commodities prices, some pension funds are turning to autocallable notes - structured investments that offer a high fixed rate of return and downside equity market protection.

However, experts say the notes offer limited upside potential and expose buyers to counterparty risk of financial companies whose stocks have been battered lately.

"Pension funds are facing a real challenge to meet their high rate of return targets, so we are working with them to meet their benchmarks,'' said Michael Heraty, managing director in equity derivatives at Merrill Lynch & Co. Inc., New York, and co-architect of the firm's enhanced liquidity note. "Derivatives, including this one, …