(24-07-2012, 10:40 PM)greypiggi Wrote: Not sure if this helps but I have asked my banker before and as told each eln the distributing private bank makes about 0.3 to 0.5% as their fee.
I would assume that 0.3-0.5% of the investment amount (it is too little if the % is based on the premium made) is the money made by the private bankers and not the bank. The bank must be earning much more than that.
As the premium paid to the retailers is already at 0.82% (based on the e.g. given earlier), I am sure what the banks are getting are a lot higher.
Considering the following
1. this product is only available for the elite few (not mass produced) and
2. hedge fees of employing hedge funds is high (maybe 5% of the investment amount)
I will have to say that the hedge fund pays a premium of about 2.5% to the banks for insurance.
Deducting 0.82% cost to retailers + deducting 0.5% cost to their bankers (salesman), that will leave the bank profiting about 1.18% of the investment amount.
Note: I am also certain than the premium hedge fund pays is based on the beta of the stock, and the probability of the stock coming down in one month.
Regardless, I thank you, greypiggi, for the useful info. Now I know why private bankers love to sell such products. Based on the e.g. given, the private banker would earn between $600 and $1000 per successful transaction made.
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