Finreon Green Income® (Volatility) at a glance

What is Finreon Green Income®?

How can investors profit?

What does Finreon Green Income® offer?

Finreon Green Income® is an innovative, risk-controlled and sustainably designed volatility strategy with robust risk/return characteristics that offers steady returns and attractive diversification potential.

Investors can use Finreon Green Income® to invest in volatility as an alternative source of income. The strategy aims at the steady and sustainable collection of the volatility premium with reduced risks of loss. Investors can thus benefit from liquid and steady returns - widely independent of the economic cycle and the accompanying interest rate developments.

The Finreon Green Income® approach for the first time combines the attractive income source volatility with impact oriented green bond investments based on ICMA (International Capital Market Association) principles. The volatility premium offers as an attractive source of income in combination with green bonds as an instrument to finance the transition an attractive diversification potential in any portfolio.

The volatility premium as an attractive source of income

Volatility strategies as attractive alternative sources of return

Alternative sources of income are increasingly being used by investors alongside traditional asset classes such as equities or bonds to generate stable and uncorrelated additional returns.

The use of volatility as a source of income is becoming increasingly popular. Instead of being dependent on the positive or negative development of the financial markets, volatility strategies take advantage of the prevailing uncertainty and corresponding fluctuation of the markets.

Volatility strategies usually consist of a premium component (option strategy) and a safe base portfolio (cash/bond portfolio).

Regular returns and attractive diversification potential

The volatility premium is optimally collected through a sophisticated and risk-controlled process

1) Collecting the volatility premium by selling put options. Although attractive regular premiums can be collected in the long term, there are always short periods when this is not the case, especially in times of strong down markets. Without hedging, there is a risk of high losses in crashes.

2) Risk-controlled premium collection through the purchase of further out-of-the-money put options (reinsurance). By incorporating a systematic risk management approach, the skimming of a steady volatility premium can be done efficiently and large value losses can be effectively reduced.

3) Optimization of risk/return characteristics through dynamic risk management. The addition of a tail event hedge further helps to reduce losses in extreme value scenarios. Furthermore, the risk-controlled management of the base portfolio increases the return potential of the strategy.

Volatility strategies are very compatible with sustainability goals

ESG-compliant collection of the volatility premium through options on the S&P 500 ESG Index: ESG indices offer a similar risk/return profile as standard indices (e.g. S&P 500 Index), but with an improved ESG profile.

Financing the transition by investing in bonds that exclusively finance green projects. The base portfolio of Finreon Green Income mainly consists of EUR-denominated Green Bonds with high credit quality (minimum share 75%). The capital of the Green Bonds is exclusively used to finance future-oriented sustainable projects in conformity with the ICMA Green Bond Principles.

Finreon Green Income® offers an attractive risk-return profile in the long term

Sustainable - The Finreon Green Income solution combines a sophisticated volatility strategy with a sustainable underlying portfolio consisting mainly of green bonds according to the ICMA Green Bond Principles. The volatility premium is collected exclusively from options with underlyings that have an ESG strategy.

Robust - Through the steady collection of option premiums and the simultaneous use of a systematic risk management mechanism, the volatility strategy aims to achieve a robust and attractive risk/return profile. By dynamically managing the underlying portfolio, the investor also benefits from long-term risk premiums while controlling for large value losses.

Efficient - The implementation of the unique combination of an innovative volatility strategy and a Green Bond base portfolio takes place within a liquid and easily accessible UCITS structure. Investors can thus efficiently benefit from the volatility return source.