The Asian economy, particularly China's, is experiencing explosive growth. China needs capital to fund the growth, and this presents a tremendous opportunity for an investment bank that can penetrate the market. Morgan Stanley establishes a joint venture with the China Construction Bank and three other partners to form China's first investment bank. The case discusses problems associated with establishing joint ventures and penetrating into developing markets.
Leland O'Brien Rubinstein Associates, Inc. (LOR), which profited by selling portfolio insurance to institutional investors, attempts to rebuild itself after the 1987 stock market crash by creating new products to meet the unsatisfied needs of equity investors. LOR proposes to sell a new family of products, called the SuperTrust, which would let investors trade an exchange-listed basket security and to buy collateralized put options on broad equity indices. The case examines the needs that gave rise to the SuperTrust project as well as the institutional roadblocks LOR had to overcome to bring this offering to market.
Leland O'Brien Rubinstein Associates, a small financial advisory firm founded in 1980, has created a successful business by selling a product commonly known as portfolio insurance. Portfolio insurance is a trading strategy that institutional investors use to establish a floor on the value of their equity portfolios, by essentially manufacturing a put option on a broad market index. The crash of 1987 highlights the flaws of this manufacturing process and forces principals of LOR to consider what to do next.