RISKS AND CONSIDERATIONS
The Patriot Technology Index levels are based on the values of notional assets and liabilities.
The Patriot Technology Index only calculates the exposure to a dynamic, hypothetical portfolio that tracks the excess returns of the underlying components and is purely notional. There is no actual portfolio of assets to which any person makes any investment or has any ownership interest.
No recommendation.
BNP Paribas makes no recommendation as to the suitability for investment of the Patriot Technology Index or any products or strategies based partly or wholly on Patriot Technology Index. You should reach a decision after careful consideration with your advisors.
Strategies relying on the levels of the Patriot Technology Index may not be successful.
There is a risk that the rules-based methodology of the Patriot Technology Index does not meet its stated objectives, including meeting its annualized target volatility of 7%, resulting in underperformance of the components that comprise the index.
Correlation of performances among the underlying components may reduce the levels of the Patriot Technology Index.
Performances among the underlying components may become highly correlated from time to time. High correlation during periods of negative returns among underlying components representing any one sector or asset type that have a substantial weighting in the Patriot Technology Index could have a material adverse effect on the levels of the Patriot Technology Index, which could in turn negatively affect the performance any product or strategy based partly or wholly on the levels of the Patriot Technology Index.
Legal and regulatory regimes may affect the Patriot Technology Index, its components or its sub-components.
The Patriot Technology Index and its components (and sub-components thereof) are subject to legal and regulatory regimes in various regions and, in some cases, in other countries that may change in ways that could negatively affect the Patriot Technology Index or its components (or sub-components thereof). Changes to the applicable legal or regulatory regimes may have a negative impact on the Patriot Technology Index level. The components (or sub-components thereof) of the index that are traded on one or more public exchanges are subject to the rules of the relevant exchange.
The Patriot Technology Index has limited historical information.
The Patriot Technology Index is a new strategy, launched on 18th June 2024. The performance shown before that date is hypothetical past performance, based on hypothetical back-tested information. This brochure also contains certain performance data based on back-testing, i.e., calculations of the hypothetical levels of the Patriot Technology Index as if it had actually existed during a defined period of time, and may in certain circumstances contain simulated levels information where the Patriot Technology Index has recently been established or issued. Further, you must note that such analysis is based on a number of working assumptions that may not be capable of duplication in actual trading terms. Unlike actual performance records, hypothetical or simulated performances, returns or scenarios may not necessarily reflect certain market factors such as liquidity constraints, fees and transaction costs and must be considered as illustrative only. Actual historical or back-tested past performance does not constitute an indication of future results. The actual performance of the Patriot Technology Index may bear little relation to its hypothetical historical results.
The Patriot Technology Index has limited public information.
The Patriot Technology Index is a custom index developed by BNP Paribas, the Index Sponsor. There is limited information relating to the Patriot Technology Index that is publicly available. In addition, publicly available information on the Patriot Technology Index, its methodology and its components is limited.
The Patriot Technology Index’s daily volatility control mechanism may result in a lower index level and the actual volatility of the Patriot Technology Index may not equal its target volatility.
The Patriot Technology Index’s daily volatility control allows the Patriot Technology Index to dynamically adjust the value of the hypothetical exposure to the portfolio the index is based on and any cash component, depending on the volatility environment. However, the risk control overlay might limit overall levels of the Patriot Technology Index in rising equity markets and may provide imperfect, limited protection in falling equity markets, particularly against sudden, large equity losses. No assurance can be given that the Patriot Technology Index methodology will achieve its target volatility goals or that products or strategies based partly or wholly on the levels of the Patriot Technology Index will outperform any alternative investment.
The closing level of the Patriot Technology Index is net of BNP Paribas’ replication and rebalancing costs.
The Closing Level of the Patriot Technology Index is net of BNP Paribas’ replication and rebalancing costs associated with the index. As a result of these costs, the value of the Patriot Technology Index could trail the value of a hypothetical identical portfolio from which no such amount is deducted.
BNP Paribas Financial Markets, an affiliate of the Patriot Technology Index Sponsor, BNP Paribas, is the index’s calculation agent who is responsible for calculating the levels of the Patriot Technology Index.
The policies and calculations for which the calculation agent is responsible could have an impact, positive or negative, on the level of the Patriot Technology Index. BNP Paribas and its affiliates are under no obligation to consider your interest as an investor in a product linked to the Patriot Technology Index.
Portions of the Patriot Technology Index may be effectively uninvested and earn no return.
The Patriot Technology Index, on each day on which it is calculated, adjusts its exposure to its components in an attempt to maintain an annualized volatility of 7%. If the aggregate weight of the components is less than 100%, the Patriot Technology Index will allocate exposure to a hypothetical cash position. As a result, the Patriot Technology Index may underperform a similar index that provides 100% exposure to its components. The hypothetical cash position is an uninvested position that does not earn interest or any other return.
The price, level or value of the components used in the Patriot Technology Index may differ from other publicly available prices.
The levels of the components that are Treasury Futures Indices (the “BNPP Component Indices”) are intended to reflect the performance of the relevant futures contracts on a daily volume-weighted average price, subject to a set of trade filters selected by the Index Sponsor to exclude trades with certain codes provided by the relevant exchange that indicate non-standard trades. Such levels are calculated by the Index Calculation Agent or an affiliate thereof and are not publicly available and may not reflect all trades reported by the relevant futures exchange. The daily closing price or any other price of the underlying futures contract may vary from the volume-weighted average price reflected by the level of the applicable BNPP Component Index.
Furthermore, a BNPP Component Index may be subject to a disruption due to the unavailability of a volume-weighted average price despite regular trading of the underlying futures contract and the availability of a closing price for such contract.
The Patriot Technology Index‘s target volatility feature may reduce its appreciation potential.
Under normal circumstances, equity futures may exhibit significantly higher volatility than the target volatility of 7%. Accordingly, the “volatility control” mechanism of the Patriot Technology Index may have the effect of skewing allocations among components in the Patriot Technology Index toward components that provide exposure to fixed-income assets (which typically have lower volatility than components that provide exposure to equity futures) or to cash (which has zero volatility). Index components that typically have lower volatility may have lower return potential than components that typically have higher volatility, and any allocation to cash will earn no return at all.
Moreover, if the Patriot Technology Index has a relatively high allocation to components that provide exposure to fixed-income assets, it will be particularly sensitive to factors that adversely affect the value of fixed-income instruments, such as increases in interest rates or declining perceptions of credit quality. A high allocation to components that provide exposure to fixed-income assets may also cause the Patriot Technology Index to underperform a portfolio more heavily weighted with higher volatility assets under certain circumstances. For example, in an equity bull market that is accompanied by rising interest rates, a portfolio heavily weighted with components that provide exposure to fixed-income assets might decline in value as a result of the rising interest rates, while a portfolio heavily weighted with components that provide exposure to equities would appreciate in value.
Other Key Risks:
- The Patriot Technology Index involves daily rebalancing that is applied to the components. Changes in the value of the components may offset each other
- The Patriot Technology Indexis subject to risks associated with non-U.S. markets.
- Certain components are based on futures contracts are and may be subject to currency exchange risk. The Patriot Technology Index contains a currency conversion mechanism that seeks to reduce losses due to currency exchange risk. It can also reduce or eliminate gains from currency exchange risk.
