KT-NOTES™

KT-NotesTM  are securities representing a proportional interest in a pooled investment fund consisting primarily of U.S. treasuries that provide an attractive alternative to investing in money market funds, bank deposits and credit securities.

Main Features:

  • KT-Notes are backed by a portfolio of short-duration U.S. treasuries (the KT-Note Portfolio) that are managed to outperform key short-term benchmarks (e.g., Fed Funds Effective Rate and government money market funds), while preserving capital

  • KT-Notes are freely transferable/ portable and can be redeemed at par on each annual anniversary from issuance or at any time for the holder’s share of portfolio NAV (for cash on same-day settlement basis; normal settlement for securities in kind). KT-Notes are also offered in a Constant NAV form

  • The KT-Note Portfolio resides in an insolvency-remote account under the investment management of a professional investment advisor, but under the operating control of BNY Mellon. The KT-Note Portfolio is held at Fedwire Securities Services but separated on the books and records of BNY Mellon (the custodian) as belonging to the KT-Note. This segregates the KT-Note Portfolio securities from those of both the portfolio advisor and BNY Mellon, eliminating counterparty credit risk

  • KT-Note Portfolio management criteria are designed to achieve: attractive relative returns, low market/NAV volatility, capital preservation and high liquidity

  • Stock exchange listed with settlement into one or more clearing systems, carrying a unique market I.D. number (i.e., CUSIP and ISIN). Daily pricing and listing on Bloomberg

  • KT-Notes are versatile collateral, e.g. may be acceptable for:

          ‒      market borrowing transactions (e.g., bilateral loans, central bank funding, repos                    and SLAs)

          ‒      collateralized reinsurance

          ‒      longevity swaps and other pension risk transfer transactions

          ‒      U.S. reserve credit for reinsurance

          ‒      Canadian reinsurance security arrangements (RSAs)

          ‒      Derivatives initial and variation margin (e.g., under Dodd-Frank and EMIR)

Regulatory guidance for market applications covers:

  • Derivative collateral

  • Dodd-Frank (17 CFR 23.156(a)(1)(ix))

  • EMIR

  • Insurance collateral and admitted asset

  • National Association of Insurance Commissioners (NAIC)

  • Reserve-Credit-for-Reinsurance trust assets for property/casualty insurance transactions

  • Reserve-Credit-for-Reinsurance trust assets for life/annuity insurance transactions not covered by Model Law #787/AG48

  • Primary Security in AG48/#787 life transactions as long as separate from a “regulatory transaction”

  • Other Security in AG48/#787 life transactions

  • Collateral or admitted assets in relation to AG48-grandfathered life reserve financings, structured as to not jeopardize the continued grandfathered status