Anyone Tried Lombard Loans and Fixed Note Coupons?

[Al Gorithum]

Learned some interesting investment strategies last week, two of which was using leveraged Lombard loans and FNC's for very impressive yields.

I understand that they're mainly available via private wealth banks (not retail banks), but they seem too good to be true. What's the catch?

[NickCQ]

FCNs are a rip-off equity derivative product structured by bored French quants with too many PhDs.

Generally they are made to look like a high yielding bond but the return profile is nothing of the sort and the fees are exorbitantly high. You get protection against a moderate downside scenario but give away all the upside + dividends as well as retaining the tail risk. Buying these with leverage supercharges the risk.

You'd be better off buying straight equities, add leverage or options if you want higher risk/reward.

[Al Gorithum]

NickCQ said:

FCNs are a rip-off equity derivative product structured by bored French quants with too many PhDs.

Generally they are made to look like a high yielding bond but the return profile is nothing of the sort and the fees are exorbitantly high. You get protection against a moderate downside scenario but give away all the upside + dividends as well as retaining the tail risk. Buying these with leverage supercharges the risk.

You'd be better off buying straight equities, add leverage or options if you want higher risk/reward.

Thank you Nick. Thought there may be a catch somewhere.