SYSTEM AND METHOD FOR SECURITIZING ZERO COUPON BOND AND EQUITY INDEX PORTFOLIOS IN A TARGET DATE EXCHANGE TRADED FUND

摘要

In a method and system for securitizing Zero Coupon Bonds and Equity Index portfolios, a Target Date Exchange Traded Fund structure is provided that can deliver investors a specific and unchanging portfolio that is precisely designed for an investment horizon between the present and a given Target Date. The ETF holds an index of ZCBs that will protect and guarantee principal at the stated target date. The percentage of the ETF's total value to be invested in this ZCB Index is determined by an exact asset allocation formula calculating the present value of the ETFs current principal. Since ZCBs always trade at a discount to their maturity value, this formula always calculates to less than the ETF's overall value hence allowing the differential to be invested in an Equity Index for long term appreciation of capital. Once the ETF is established and invested under this structure it need not be re-balanced or it may be re-balanced periodically. The ETF may also be re-balanced based on a given level of appreciation or depreciation in the ZCB Index, the Equity Index, or the overall ETF. Any rebalancing is implemented according to this same asset allocation formula. This system and method provides investors seeking a particular time horizon or target date to receive guaranteed protection of principal, absolute transparency regarding how their funds are invested and the potential for meaningful capital appreciation.