DD Support Board and Research Team

[bar1080]

Part 2: "The market’s collapse punished some banks that sold the products, which are considered derivatives. Société Générale SA, BNP Paribas SA and Natixis SA each lost more than $200 million on their structured-products businesses this year.


To understand how Mr. Mark and other investors were drawn to complex derivatives, it helps to go back to what happened after investment bank Lehman Brothers failed in 2008. Central banks cut interest rates to historic lows, which helped stabilize the financial system. It also lowered the income generated by the safest and most-stable investments, pushing investors into a risky hunt for bondlike products that could offer higher returns.

Mr. Mark bought a leveraged ETN issued by UBS AG that bet on companies that invest in the mortgage market, known as mortgage real-estate investment trusts. For others, the search for income led to investments in companies that bundled small business loans or oil pipeline rights, their payouts inflated by borrowed money." [end of part 2]