Most investment portfolios are comprised of real property, stocks, bonds, and mutual funds – but there is an additional group of investments that may be suitable for certain investors. Most commonly known as Structured Products, these alternative investments have recently experienced a surge in popularity among U.S. investors. Because of their ability to address a wide variety of investor objectives, Structured Products can help investors diversify their portfolio, manage risk, and take advantage of specific market views.

    Structured Products combine many of the features of traditional investments such as bonds with financial derivatives such as options. This combination allows for returns linked to the performance of underlying investments, such as individual securities, market indexes, currencies, and commodities. Structured Products provide a range of additional features, including:

    • Different levels of principal protection
    • Enhanced yield
    • Higher-than-market coupons

    It is important to note, however, that Structured Products are complex and best intended for sophisticated investors, and may have costs of ownership, such as brokerage fees. Structured Products carry certain unique risks which should be carefully considered and fully understood by financial professionals and individual investors before investing.
    Reverse Convertible Securities and Structured Notes are offered via prospectus, offering circular or disclosure statement. You can obtain these documents through your investment representative or dealer, or through the EDGAR section of the Securities and Exchange Commission (SEC) website at www.sec.gov. Carefully review these documents prior to making an investment decision. For additional information or to place an order, please contact your financial advisor or your firm’s trading desk. Structured Products are not suitable for all investors. Risks may include loss of principal or the possibility that at expiration the investor will own the reference asset at a depressed price. Structured Products often limit or cap upside participation in the reference asset, particularly if some principal protection is offered or if the security pays an above-market rate of interest. They contain a derivative component whose profit and loss potential emulates an option contract, particularly those where principal invested is at risk from market movements in the reference security. Even though Structured Products pay interest like debt securities, the potential loss of the principal for many such products may make them unsuitable for investors seeking alternatives to conventional debt securities. Certain securities discussed in this material are registered with the Securities Exchange Commission (the “SEC”) and the issuer of those products has filed a registration statement (including a prospectus, a prospectus supplement and a preliminary pricing supplement) with the SEC. All relevant offering documents including term sheets and prospectuses should be consulted prior to investing in these securities. Certain securities discussed in this material are not registered with the SEC but are issued pursuant to an exemption from registration. Before Investors make any investment, they should read the prospectus supplement and preliminary pricing supplement for registered securities filed with the SEC or the relevant offering documents for non-registered securities for more complete information about such issuer and the securities being offered. Investors should understand characteristics, risks, and rewards of each Reverse Convertible as well as those of the reference asset before making a decision to invest in the security. Investors should contact their own accounting, tax or legal advisors to review the suitability of any investment. Structured Notes are investment vehicles issued as either registered securities, non-registered securities, or as certificates of deposit. Registered securities are filed with the SEC as medium term notes. Non-registered securities are exempt from SEC registration and are typically issued by foreign-based banks via their U.S. branch offices using a 3A2 exemption. Certificates of deposit are insured by the Federal Deposit Insurance Corporation, please visit www.fdic.gov for current deposit insurance limits. Certificates of Deposit are not considered securities.


    Asset-Backed Securities (ABS) are securities for which underlying credit exposures can be auto loans, student loans, credit card loans, equipment loans, floor plan loans or any other pledged first lien asset. They are typically short term triple-A investments which offer spreads over similarly-rated money market securities. HCM can help provide specific issue color and offerings to enhance returns in your short term holdings portfolio, dedicated towards money market returns, 2-year time horizon or less.


    Collateralized Mortgage Obligations (CMOs)

    HCM has assembled a Trading Team with over 50 years combined experience, with product knowledge encompassing both New Issue and Secondary Agency CMO trading combined with Whole Loan trading. This results in a wide range of CMO offerings as well as idea sharing and trading strategies.

    Pass-Through Securities

    Pass-Through Securities are the building blocks of the MBS market. HCM is active in most aspects of the specified pool market in all three agencies (GNMA, FNMA, and FHLMC), with particular expertise in the seasoned arena.

    Collateralized Mortgage Backed Securities (CMBS)

    Collateralized Mortgage Backed Securities (CMBS) are securitized commercial mortgage loans backed by mortgages on commercial properties such as multifamily apartment buildings, office towers, industrial buildings, hotels, and retail shopping malls. Commercial mortgage securities are usually collateralized by fixed-rate mortgages that are locked out from prepaying for 5 to 10 years but may also have floating-rate bonds collateralized by shorter-term prepayable mortgages. The pool of securities has a multiclass structure starting with investment-grade bonds that are rated triple-A extending all the way down to unrated junior class bonds. If any mortgage loan defaults, losses are allocated to the lowest rated bonds and recoveries are credited to the senior-level investment-grade bonds. This allocation of loss enables the entire collateral loan pool to be sold to a variety of investors. HCM can provide specific issue color and analysis on current markets and future projections for returns and performance.

    MBS Derivatives

    Adjustable Rate Mortgage Securities


    Municipal bonds (“Munis”) are issued by government entities to fund projects such as the building of roads, schools, and hospitals, and are often tax-free (although it is important to note that there is a separate market of Municipal bonds that are subject to federal taxes).  The HCM Municipal Desk has over 60 years of experience in evaluating and trading all types of municipal debt, a critical factor given today’s economic times.  With investment grade municipal bonds rated in four basic classes, from high grade to minimum investment grade, it is essential to understand the underlying credit worthiness.


    A United States Treasury security is government debt issued by the United States Department of the Treasury. Treasury securities are the debt financing instruments of the United States Federal government. All of the marketable Treasury securities, consisting of Treasury bills, Treasury notes, Treasury bonds, and Treasury Inflation Protected Securities (TIPS), are very liquid and are heavily traded on the secondary market.

    HCM’s U.S. Treasuries desk provides institutional directional analysis for the U.S. Treasury markets and U.S. Treasury yield curve, as well as Non-Dollar denominated debt. Using our proprietary technical approach, HCM is able to provide market commentary to primary dealers, hedge funds, insurance companies, and large mutual/pension funds.


    The HCM Agency Desk looks to enhance your client’s portfolio with various types of Agency products distributed through our vast array of contacts in the Primary and Secondary markets.  These Government-Sponsored Enterprises (GSEs) provide many different structures including fixed coupons, step-ups, estate features, callables, and non-callable bonds.  Among the most active issuers of Agency debt are Federal Farm Credit System Banks (FFCB), Federal Home Loan Banks (FHLB), Federal Home Loan Mortgage Corporation (Freddie Mac), Federal National Mortgage Association (Fannie Mae), Farmer Mac, and Tennessee Valley Authority (TVA).


    Corporate bonds are issued by corporations (private or public) to fund general operating expenses or projects of the business.  High-Yield Corporate Bonds are Corporates rated Ba or lower by Moody’s and BB or lower by Standard & Poor’s and Fitch Ratings.  Due to the possible risk associated with a lower rating, High-Yield Corporates are, as their name implies, issued with higher interest rates demanded by Investment Grade Corporates.


    Corporate bonds are issued by corporations (private or public) to fund general operating expenses or projects of the business.  Investment-grade Corporate Bonds are Baa or higher by Moody’s and BBB or higher by Standard & Poor’s and Fitch Ratings. The Halen Capital Investment Grade Trading Team is composed of a well-seasoned group of veterans with a broad range of experience offering their insight and expertise to our clients.


    Certificates of Deposit (CDs) can offer investors the safety of FDIC insurance, along with a variety of yields, maturities, and structures and an Estate Feature. Brokered CDs can provide investors with additional features such as access to large networks of issuers and consolidation of account statements.