Managed Buy-Sell Programs | Subcontracts India

Managed Buy-Sell Programs

A Comprehensive Guide by Subcontracts India

Overview

A managed buy-sell program refers to a structured investment strategy where a manager or investment professional actively oversees the buying and selling of assets within a portfolio. The objective is to achieve specific financial goals or implement a particular investment strategy.

Key Components

Management Approach

  • Active Management: Decisions regarding when to buy or sell assets are actively made based on market conditions and economic indicators.

Objective and Strategy

  • Objective: Achieve capital preservation, income generation, or capital appreciation.
  • Strategy: Combines asset classes like stocks, bonds, commodities, or alternative investments.

Risk Management

  • Risk Assessment: Tailors the program to the investor's specific needs.
  • Risk Mitigation: Protects portfolios from adverse market movements.

Buy-Sell Decision Process

  • Market Analysis: Uses technical and fundamental analysis to inform decisions.
  • Timing: Timing buy and sell decisions is critical.

Investor Participation

  • Managed Accounts: Offers individual accounts tailored to investors' goals and risk tolerance.

Monetization and Trading

Traders cannot use their own funds for trades and require collateral support from financially qualified investors. The process typically involves:

  • Traders securing initial issuance of instruments like SBLCs, BGs, or MTNs.
  • Investors providing collateral to support a trade credit line.
  • Pre-established exit buyers purchasing assets at a higher price to generate profits.

Profit Sharing

Investors can earn substantial profits, ranging from 80% to 100% of the trade credit line amount. Example:

  • A €500m bank debenture purchased at €200m and sold at €350m generates €150m profit.
  • Profit is split between the investor and trader.

Engagement Steps

  • Investors submit KYC and proof of funds.
  • Trading organizations prepare the trade contract.
  • Approvals and trade commitments are arranged within a couple of weeks.

Challenges and Considerations

The supply of legitimate programs is limited, and demand far exceeds it. Trust and authentic relationships are critical for successful participation. Misrepresentation by brokers often causes misunderstandings.

Private Placement Program (PPP Trade)

Private Placement Program (PPP Trade)

Capital Funding | Capital & Credit Enhancement | Managed “Buy Sell” or “PPP”

General Structure of the PPP Program

  • Instrument Owner(s) shall join as co-owners with limited rights in a Securitization Vehicle in Luxembourg, operated by our Trading Desk.
  • Asset-backed financial instruments such as Sovereign Bonds, MTNs, US T-Bills, Exchange Registered Corporate Bonds, Listed Company Shares, SBLCs, BGs, etc., will be collateralized to issue securitized bonds/notes, underwritten by Goldman Sachs and PIMCO Global, for institutional investors.
  • Funds raised will be used for global trading and investment, with returns distributed among institutional investors, the Instrument Owner(s), and the Trading Desk.

Standard Procedure for Commencement of the Program

  • Instrument Owner must pass a board resolution and authorize a Director to represent them.
  • A Letter of Intent (LOI) must be submitted to the Trading Desk (format provided).
  • Required documents include Board Resolution, Authorization Letter, LOI, and KYC documents.
  • KPMG will oversee onboarding as co-owner and collateralization procedures in collaboration with HSBC Luxembourg.
  • Asset-backed securities will be underwritten by Goldman Sachs and PIMCO Global, with funds deployed in financial markets.
  • Minimum lock-in period: 3 years (extendable to 5 years).

Investment Returns

  • Predictable returns designed using advanced technologies by IBM, AWS, EOS, and Bloomberg.
  • Notional returns expected: 25%-45% annually.
  • Liquidity criteria will align with the risk management framework of Goldman Sachs and PIMCO Global.

Costs Involved in Commencement

  • Formation costs for the Multi-Compartment Securitization Vehicle are borne by the Investor/Instrument Owner.
  • CSSF Luxembourg co-ownership charges are to be paid by Investor/ Instrument Owner.
  • Compliance, due diligence, and regulatory charges are covered by the Investor/Instrument Owner.
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