SRPInsight Issue 4 | April/May 2021 @SRP_Insider

ACTIVE APPROACH TO PASSIVE INVESTING

AMERICAS // CUSTOM INDICES PROFILE // FNZ-HUB SRP AWARDS // SOCGEN p10 p24 p28 SRPInsight

CONTENTS

Editorial: Amelie Labbé, Pablo Conde, Lavanya Nair, Summer Wang, Marc Wolterink Contents Production: Paul Pancham

Marketing: News Europe 4 Monique Kimona Bonnick

The Application Programming Interface (API), is a web-based software Sales: News Americas 10 application which allows clients to access our data in a controlled Reihaneh Fakhari manner & integrate it using their own software packages & systems. News Apac 16 If you are interested in having a similar bespoke report produced for your organisation, please Expert View: Industry has shown resilience, now it is contact: at an inflection point 21

Retrieve. Reihaneh Fakhari T: +44 (0)20 7779 8220 Profile:FNZ Q-Hub - servicing QIS and AMCs • Download real time SRP data directly to excel M: +44 (0)79 8075 6761 with a customised touch 24 E: Reihaneh@structuredretail • Receive market share on each asset class/payoff for products.com each company of interest Feature: BBVA shifts gear as equities chief plan gains momentum 26

REPRINT POLICY: SRP’s Reprint Policy: Articles published by Feature: SRP 2021 Awards - SG racks up €15bn on SRP can be sent to sources for reference and for internal use only (including decrement, and counting 28 Interrogate. intranet posting and internal distribution). If an article is to be shared with a third party or re-published on a public website Q&A: Barclays: commodities are an interesting • Monitor & increase your market share (i.e. a location on the World Wide Web space to watch 30 that is accessible by anyone with a web • Carry out accurate trend analysis with comprenhensive browser and access to the internet), product data spanning over 15 years in seconds SRP offers reprints, PDFs of articles or Q&A: View from the top: investors want a more advertisements, and the licensing to active approach to saving, investing 32 republish any content published on the SRP website. Prices vary depending on size, quantity and any additional Expert View: The role of derivatives in the evolution requirements. To request authorisation to republish any Q&A, profile or feature of structured products 34 published by SRP, please contact: Incorporate. [email protected]. Expert View: Product analysis: downside accrual barrier with a twist 36 • Import data directly into in-house systems/platforms and interrogate the data and risk more effectively Product wrap 38 • Combine data sets with other products and visualise it in the context of the larger business People moves 41

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NEWS | EUROPE NEWS | EUROPE SIP Nordic partners with BNP Paribas to enter Belgian market sees renewed interest for South African market structured products After failed attempts in the US and UK markets, the Swedish distributor has Structured products contributed to the recovery of the financial markets end-2020 launched its first products in South Africa with the French bank. as many investors include them in their portfolio.

wedish structured products Sales volumes of structured products Belgium: primary market sales and issuance by quarter* marketing firm SIP Nordic has on the primary market amounted to €1 entered the South African billion (excluding leverage products) in 1,600 80 market via a collaboration with the fourth quarter of 2020, according BNP Paribas and investment to the latest figures released by the 1,400 70 platform iTransact. This is the third attempt by Belgian Structured Investment Products S 1,200 60 Association (Belsipa). SIP Nordic South Africa is headed by the Swedish firm to expand 1,000 50 Peter Steele as managing director. Compared to the previous quarter, sales Steele joined the firm in early 2020 to volumes increased by 31% but year-on- 800 40 establish the firm’s sales distribution in beyond the Nordics year (YoY) turnover was down by 24% South Africa. (Q4 2019: €1.3m). 600 30 400 20 Steele was previously in charge of The volumes in equity-linked products structured products and unit trusts decreased by 29% to €413m while 200 10 distribution at Cadiz Asset Management representative of Meteor Asset at the forefront of innovation in the turnover of products with fixed income- in South Africa. He said SIP Nordics SA Management. world by investing extensively in six underlyings, at €539m, tripled when 0 0 will offer ‘a carefully designed range of innovative fields. compared to Q3 2020. Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 structured products to bridge the gap SIP Nordic has a number of live products Sales EURm (LHS) Issuance (RHS) between investors’ capital growth and across markets including three live The BNP Paribas Tandem Plus Certificate The share of capital-protected products income needs, and protection from products in the UK set to mature (ZAR) Series 1 is a five-year structure as part of the primary market turnover *Excl. flow and leverage products market falls’. between March and June 2021 worth an linked to the Solactive Sustainable rose by 38% on an annual basis, while it Source: StructuredRetailProducts.com estimated US$22m, as well as 141 live Development Goals World RC8 EUR even doubled on a quarterly basis. The SIP Nordic team is completed with products in Sweden, 81 in Finland, and Index, which is made up of a diversified Graziella Wall also formerly at Cadiz AM, 26 in Norway. portfolio of companies worldwide The turnover of structured investment protection; and one product each shares of 20 global companies, capped and Leanne Weiss and Selest Hinton as contributing to the Sustainable products sold on the secondary market protects 85% and 50% of the nominal at a maximum rise of 15%. The minimum business development managers. SIP Nordic opened offices in South Development Goals and which has the in Belgium amounted to €450m, an invested, respectively. capital return is 90%. Africa in January 2020, and launched addition of a risk control (RC) mechanism. increase of 16% compared to Q3 2020 The firm is seeking to expand the its first products in mid-February 2021 but a decrease of 25% YoY. Thirty products were linked to a single One hundred and one products existing offer for South African investors via the iTransact platform which carries The products will pay a 12% coupon on a index, of which the Stoxx Global matured during the fourth quarter. Of which is mainly focused on unit trusts, structured products from other South quarter of the initial investment after one Structured products made a reasonable Infrastructure Select 30 EUR – seen these Belfius’ Tactical Autoswitchable 5 with a range of structured income plans. African providers such as Absa and year and a 24% on a quarter of the initial contribution to the general recovery of in four products (€27m) – was the provided the highest annualised return. Investec. investment after three years regardless the financial markets at the end of last most frequently used. There were also The product, which was linked to the This is the third attempt by the Swedish of the index performance and 150% year, according to Belsipa chair Florence structures linked to Stoxx Europe 600 Eurostoxx Select Dividend 30 and sold firm led by Mats Halvorsen to expand The current offer includes three ZAR- participation at maturity on the index Devleeschauwer. Healthcare (€47m from three products); €1.2m at inception, returned 130% of beyond the Nordics. SIP Nordic denominated uncapped call products performance on 50% of the investment Solactive Digital Economy (€35m from the nominal invested after five-years, or launched SIP America, a US registered hedged by BNP Paribas which will be alongside the initial capital. ‘[Structured products] are seen as a two products); and Thomson Reuters 5.38% pa. broker-dealer, in 2010 to replicate its available for subscription until 31 March. resilient part of the investment universe Europe Equal Opportunities Select Index service and support model for structured The BNP Paribas Tandem Certificate and many retail clients have them back (€22m from three products), issued According to Belsipa, more than half products in the US intermediary space, The BNP Paribas Enhanced Growth (ZAR) Series 2 is also a five-year 100% in their portfolio,’ she said. during the quarter. of all newly issued structured products but exited in the market in 2013. The Certificate series 2 is a five-year fully capital protected structure linked to the were capital-protected. firm also launched in the UK in 2009 protected structure and will pay at Solactive Sustainable Development SRP’s own data saw 43 structured The best-selling product in Q3 where to assist RBS with the distribution of maturity 145% participation on the Goals World RC8 EUR Index. The products (excluding flow and leverage) ING Bank’s three-year Participation The importance of capital protection, structured products in the UK adviser average performance of the Nasdaq product will pay a 12% coupon on half of striking between 1 October and 31 Notes 11/23, which sold €25m during within the spectrum of structured market but closed its UK business in Yewno Global Innovative Tech Index, the initial investment after one year and December 2020. Of these, 16 pay its subscription period. The securities products, be it bonds, funds or insurance 2015 and was relaunched as Meteor which is comprised of 100 stocks of a 150% participation on the performance a minimum capital return of 100% or participate 100% in the positive products, applies to all segments, said Consulting Ltd, which is an appointed leading companies that are positioned of the underlying. more; 20 provide at least 90% capital performance of a basket comprising the Filip Gils, vice-chair, Belsipa.

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NEWS | EUROPE NEWS | EUROPE BBVA adds to QIS range with a focus on Irish structured products fund aims at governance €200m with new sterling share class The Spanish bank has developed two new sustainable-centered indices with Ballybunion Insignia Defined Returns Fund has celebrated its first anniversary by Solactive as it continues to build its Quantitative Investment Strategies (QIS) offering. adding a GBP share class as it is looking to compete in the UK market.

output that is fairly distributed across investable indices, hence all of our The qualifying investor alternative competitors in the UK have done. A society encourages entrepreneurship indices are wrapped into the industries´ investment fund (AIF), authorised by the couple of them manage assets north of and boosts opportunities for everyone,” standard investment vehicles allowing Central Bank of Ireland, wrapped up its €200m and I see no reason why our said Suarez. “Investors are more and our clients to invest in the most first year in business with a track record fund can’t do the same,” said Murphy. more willing to recognize this factor in convenient way”, according to Juan of 9.7%, ahead of its target return of 7-9% companies’ behaviour as customers Ramón Domínguez, head of structured per annum. As of the end of February, the fund was around the world are already doing for equity product sales at BBVA. equally invested in defensive autocalls and many years.” “Now that we have a one-year track step-down autocalls (45% each), with the “BBVA institutional clients have already record, which is very strong relative to remaining 10% invested in twin-wins. It has The Solactive BBVA ixG Global at their disposal our QIS Indices through other funds, a lot institutions are very exposure to nine different counterparties, Governance & Board Diversity Index vehicles such as warrants, structured interested in the fund and are perhaps of which EFG, at 17%, takes up the biggest focuses on companies’ corporate notes or mutual funds and OTC looking to take up an allocation,” said allocation, followed by UBS, BNP Paribas governance, the G part of ESG. The derivatives or Total Return Swaps,” he Murphy. (10.70% each), and BBVA (10.40%). Ninety- index ranks companies by their overall said. “ In addition, for each of our QIS five percent of the products in the fund are corporate governance score, bestowing indices we are offering at least one The fund was launched one year ago denominated in euros, with five percent companies with a better score for risk control and decrement version and currently has a value of €12.5m, denominated in sterling. diversity on their board with greater that optimizes the way to structure an Ballybunion Insignia Defined Returns but Murphy is hoping to get to €20m weight in the final index. investment product. Fund, the Irish domiciled structured as quickly as he can to make it more In February, there were no autocalls or products fund that primarily invests in attractive for institutional investors. maturities and no new additions to the The two new custom indices, the The Solactive BBVA ixG Global “Risk Control indices are designed to autocalls, has launched a sterling share fund, but March is promising to be a busy Solactive BBVA ixS Global Inclusive Governance & Board Diversity Index keep volatility and dividend parameters class after demand from UK investors. “We think we can get there comfortably. month with several autocalls/maturities Growth Index and the Solactive BBVA completes the sustainable angle by at predetermined levels and become We are targeting what some of our expected. ixG Global Governance & Board Diversity rewarding companies that implement best the perfect underlying for investment “We have got a lot of contacts in Index, track the performance of high- practices in the ruling and process that products at mid and long term with some Ireland, and we are developing these growth global companies that comply drive the company management. capital protection given the current all the time, but outside of Ireland there Ballybunion: Insignia Defined Returns Fund: counterparty exposure* with the United Nations Sustainable market scenario of ultra low interest rates. are an awful lot of opportunities,” said Development Goals and are also leading “Diversity in Board outstands as one of This way, investors with risk aversion Peter Murphy (pictured), managing EFG corporate governance efforts. the key pillars we identify as fostering this can still find very attractive investment director, Insignia Financial. “Structured good governance,” said Suarez. opportunities on Growth and MaxNav products funds have been popular in the UBS The Spanish bank will offer a complete kind of payoffs.” UK, with a couple of high profile funds range of products from delta 1 to options The bank’s objective is to bring attracting a lot of assets, so for us having BNP Paribas on risk control versions to its clients “responsible and transparent investment Timo Pfeiffer, chief markets officer at a sterling share class allows us to start wrapped in the most efficient way for opportunities to everyone through Solactive said the latest release marks knocking on the door of discretionary BBVA their interests, Pablo Suarez, head of the completion of “a very meaningful fund managers.” Natixis quantitative investment strategies at index range that gives investors the full BBVA (pictured), told SRP. spectrum of ESG investing”. The GBP share class was added to allow Raiffeisen a UK client to be invested in sterling, The Solactive BBVA ixS Global Inclusive BBVA established its QIS business in as opposed to euro, the fund’s base Citi Growth Index incorporates leading Inclusive Growth late 2020 in a move to offer investors currency. It is a hedged share class, the Morgan Stanley growing companies that are in line broad access to ESG investing solutions. money is taken in sterling after which is with the 17 Sustainable Development is the capstone of In total, the bank has developed five decided whether to keep it in sterling to Leonteq Goals within the UN’s 2030 Agenda for indices with Solactive besides the two invest in sterling, or translate it into euros Sustainable Development including, for global economic new governance-tilted indices, global to invest in euros. SGSS (Cash custodian) example, zero hunger, quality education, ESG leaders, including the Solactive 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% and gender equality. development BBVA Climate Action PAB Europe index, “That is what we have done in this case,” Solactive BBVA Climate Action CTB said Murphy, adding that the client should * As of 28 February 2021 “Inclusive Growth is the capstone of Europe index, and BBVA ixESG Global receive a very similar return to the euro Source: Insigniafinancial.ie global economic development, an Leaders EUR Risk Control 6% Index. share class, net of the hedging costs.

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NEWS | EUROPE NEWS | EUROPE

EFG International Eusipa: volume largely stable Luma Swiss expansion set BNPP doubles down goes with ‘Investment on Exane Navigator’ on Europe’s structured in motion The Swiss Structured Products Association (SSPA) has products markets added Luma Financial Technologies as partner member. and 1,237,343 leverage products - the The association’s membership base number of listed products was stable includes now 43 members across the on a quarterly basis, though contracted entire structured products value creation seven percent from the previous year. chain. Luma Financial Technologies most recently opened an office in Zurich to offer After a 17-year partnership, BNP Banks issued 1,332,686 new investment more asset managers and private banks It is our ambition Paribas is looking to acquire up and leverage products in the fourth access to its platform. The membership to 100% of Exane, raising its stake Turnover in investment and leverage quarter of 2020, an increase of two of the SSPA is a further step towards to help support from the 50% currently held. products listed on reporting European percent on the previous quarter and the full establishment of Luma Financial financial markets totalled €35 billion in 19 % year-on-year. In total, 147,704 new Technologies in the largest market for the Swiss The French bank is seeking to the fourth quarter of 2020, an increase investment products were launched, structured products in the world, according ‘further strengthen and widen of five percent quarter-on-quarter accounting for 11 % of new issues; to David Wood, managing director of Luma industry the range of cash equity and EFG International has selected and 27% year-on-year, according to the 1,184,982 new leverage products Financial Technologies. derivatives services’ it offers Investment Navigator to ‘further the European Structured Investment represent 89 % of the total. Investment to institutional investors and enhance’ its compliance Products Association (Eusipa). product issuance was up 16 % on the ‘It is our ambition to help support the corporates globally, and leverage framework, and automate suitability previous quarter; leverage product Swiss industry of structured products with the acquisition of Deutsche assessments of its services and Fourth quarter turnover in investment issuance was unchanged from Q3 2020, our platform and international expertise banks and wealth management clients to Bank’s Global Prime Finance and products. products on European trading venues though up 22% year-on-year. and to promote the industry as a whole build out new services and operational Electronic Equities business in 2019 amounted to €13 billion, 37 % of the total. as part of our expansion into Europe,’ capabilities - distribution processes, to position the bank as a leading Swiss fintech Investment Navigator Investment product turnover increased For Austria, Belgium, Germany, and said Wood, who joined the US platform compliance functions, and integrate them provider in global equities. platform offers reg-tech solution 40 % over the quarter but remained Switzerland, the market volume of earlier this year to spearhead the firm’s into the infrastructures of those banks. to automate suitability assessment largely stable compared with the last investment and leverage products European expansion. Luma will follow the same strategy it has Exane is a small player in the of services and products including quarter of 2019. Turnover in leverage issued as securities stood at €281 billion developed in the US and Latam by offering public offering space and has distribution eligibility checks on products including warrants, knock- at the end of the fourth quarter, a two Wood is seeking to replicate the work the platform’s capabilities to private banks just over 275 live products worth ISIN level for mutual funds, ETFs out warrants, and constant leverage percent quarter-on-quarter increase. Luma has been done in the US with private and wealth managers in Europe. an estimated US$364m across and structured products as well certificates, reached €22 billion in markets including Italy (254 as digital compliance guidance on Q4 20, representing 63 % of the total. The market volume of investment products/US$292m) and Ireland (16 cross-border business activities. Turnover in leverage products increased products was a stable €271 billion – up products/US$53m). There are also 47 % year on year, but fell eight percent just two percent quarter on quarter four live products issued by Exane The Investment Navigator solution from the previous quarter. and two percent year on year. The on SRP’s institutional database. capabilities will be integrated into outstanding volume of leverage products Santander joins SSPA Swiss bank’s existing platforms At the end of December, trading venues totalled €10 billion, a 30% year-on-year Santander has joined the SSPA as a new said Alfredo Madrigal, head of equity BNP Paribas has not disclosed for advisory, discretionary and located in reporting Eusipa markets were decrease that can be attributed largely member and issuer. With this addition, the derivatives & exchange traded derivatives the terms of the acquisition or if execution only businesses offering 448,035 investment products to the Swiss market. SSPA expands its network to 42 members at Santander. ‘We look forward to actively Exane will be integrated into the worldwide, with the first Investment across the entire value creation chain, participating in the association and to bank’s equities division as there Navigator web-application having from issuers to trading platforms and buy- making a contribution to the further is an overlapping of functions been rolled-out in Switzerland side to brokers and partners. development of the Swiss market for and management across prime earlier in January. structured products.’ services, global electronic trading, Santander is seeking to expand further its equity derivatives and equity ‘Reliable information on service and position in the world’s largest market for According to SRP data, the Spanish capital markets. investment restrictions, especially Turnover in leverage structured products. The bank is present bank was the main manufacturer in in the context of cross-border in 10 markets in Europe and the Americas, Spain in 2020 with over 270 products Alessandro Ricci, Exane Derivative’s banking, has become essential for offers structured products via its equity launched worth an estimated US$3.3 former head of structured products wealth managers to comply with products increased 47% derivatives business. billion, and fifth most active issuer in and co-head of derivatives international legislation,‘ said Julian Europe in terms of volume sold. alongside Mathieu Bernard, who is Köhler, co-founder and chairman of ‘Our decision to join SSPA underscores also head of equity derivatives flow Investment Navigator. year on year our ambition to further expand SRP data also shows that Santander sold business since 2017, joined Leonteq Santander’s activities of offering an estimated US$366m in structured in mid-2020. structured products in Switzerland,’ products in Latin America in 2020.

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NEWS: AMERICAS NEWS: AMERICAS Société Générale deploys prop index plays HSBC, Barclays introduce new custom amid expanding annuity market indices in the US The French bank is seeking to capitalise on its index capabilities to respond to US annuities provider Athene USA has launched the Athene AccuMax, a fixed demand for custom indices in the indexed annuities market. indexed annuity (FIA) offering three different options to get exposure to the market.

G’s recently launched Global fundamental indicators to assess the are a market that have been of particular control mechanism, ‘the range of both the driver for the valuation of regional Sentiment Index was one of current market environment (especially interest for the bank, as the segment is positive and negative performance of the sectors. The Shiller Barclays CAPE three indices chosen by US GDP and inflation expectations) to rotate fast-growing and is projected to grow in index is limited’. Allocator 6 Index include a six percent annuity provider American among three conviction-based, outlook- the coming years. volatility control mechanism. Equity to underlie its Asset specific portfolios. The new Athene AccuMax FIA SShield fixed indexed annuity (FIA). The products address a gap in the features the new AI Powered Multi-Asset There are 13 structured products featuring “This index is particularly special for us retirement market today, offering more Index (AiMAX1) and the Shiller Barclays Barclays Shiller underlyings including 10 The other two are the exclusive BofA at SG as it leverages the work of Dr. value to an investor that desires more CAPE Allocator 6 Index (BXIISC6E1), products sold by Barclays Bank Delaware Destinations Index, developed by Solomon Tadesse, our head of equity upside than traditional FIAs, and more as well as a new annual interval sum linked to the Barclays Shiller CAPE US Bank of America in collaboration with research in the US. He brought our downside protection than traditional crediting strategy linked to the S&P 500 Sector Risk Controlled 7% USD ER Index, American Equity, and the Credit Suisse own in-house research and intellectual variable annuities (VAs). index. It is the first time the AI Powered and seven indexed annuities sold by Tech Edge Index which combines property to create a fully rules-based Multi-Asset Index and Shiller Barclays Annexus linked to the Barclays Shiller biotech ETF asset classes with fixed systematic index,” said Dadlani. “We continue to see innovation in both CAPE Allocator 6 Index appear on CAPE US Sector Risk Control 10% in the income components. spaces, and we do think that customised SRP’s database. US market. The range of SG’s QIS provides indices play a very important role in the The product line features varying terms innovative transparent solutions in areas interest in that space and will continue to The AI Powered Multi-Asset Index which Athene has 270 live indexed annuities in of five, seven and 10 years, and offers of portfolio allocation, hedging and alpha do so,” added Dadlani. is exclusively licensed by HSBC and the US market under the Athene Annuity new equity as well as multi-asset index generation rely on rigorous investment sponsored by San Francisco-based and Life brand, worth an estimated options. Clients would have the choice research from the SG research team. The new FIA has been designed for long- EquBot, uses the AI capabilities of US$1.9 billion, according to SRP data. to purchase a higher rate on crediting ANNUITY SALES term savers ‘seeking index-driven growth EquBot to generate long-term stock strategies for enhanced growth potential. “Our FIA indices reflect the body of our According to the Secure Retirement potential as an alternative to traditional returns. The index was developed by The most featured underlying index research in designing innovative asset Institute, total annuity sales dropped nine fixed income alternatives,’ according EquBot and is administered, calculated on Athene’s annuities is the S&P 500 According to Natasha Dadlani, managing allocation solutions for robust long-term percent in 2020 from the previous year, to Grant Kvalheim (pictured), CEO and and published by Solactive. (77 products/US$1.1 billion) followed by director, equity derivatives investor performance,” said Tadesse. totalling US$219 billion. president of Athene USA. the BNP Paribas Multi Asset Diversified solutions at SG, the Global Sentiment The Shiller Barclays CAPE Allocator 5 Index and the Morningstar Dividend Index leveraged the bank’s long- Rilas and fixed-rate deferred annuity ‘It blends the spirit of opportunity with 6 Index is part of the Barclays range Yield Focus Target Volatility 5 Index standing SG Sentiment Indicator as a INCREASED DEMAND sales contributed towards the growth the security of guarantees in unique developed by Professor Robert Shiller (42 products/US$190m, each), and the way of assessing market sentiment and The use of proprietary and custom for protection-focused annuity sales. and powerful ways,’ he said, adding which utilises the Cyclically Adjusted Janus SG Market Consensus Index (22 conviction. indices linked to indexed annuities has In 2020, Rila sales soared by 38% and that because the indices use a volatility Price Earnings (CAPE) ratio as a key products/US$146.2m). increased in popularity due to their fixed-rate deferred annuity sales also The index aims to diversify across ability to provide diversification within an increased by 10%. global asset classes to give its portfolio investor’s portfolio. resilience. By contrast, income-focused annuity There are many strategies available in sales plunged 28%, due to persistent, First ESG indexed annuity hits the US market “It was not created with a specific the market today, with different goals low interest rates. Immediate income product in mind as none of our indices and different expected performances in annuity sales and deferred income Midland National Life Insurance, a Midland National and features a short- Examples include companies seeking to are created with a specific product in various market scenarios. annuity sales fell more than 30% each for subsidiary of Sammons Financial is the first term offering five-year guaranteed support a more diverse workforce, reduce mind, but we are glad to see American the year. to launch a fixed index annuity (FIA) aligned participation rates. carbon emissions, and strengthen data Equity found the index complimentary to “A portfolio allocations approach to many with sustainable investing via the newly privacy. The proprietary index is one of its own product features,” said Dadlani. indices can provide an investor with a “At the start of the pandemic, the 10-year deployed BlackRock ESG US 5% Index. BlackRock Index Services developed multiple that have revamped the way in diversified and resilient portfolio that treasury plummeted to 56 basis points the index to widen access to sustainable which investors approach annuity products, The bank’s latest addition to its can navigate many market regimes, so and the equities market contracted The firm made the ESG index available investing by enhancing the league of as seen it their increased popularity. proprietary index suite is the SG Macro no one particular strategy is going to 32%,” said Todd Giesing, senior on two of its established FIAs including sustainable indices that can be used in Compass Index which is the first perform every market environment, but a annuity research director, SRI. “Worried the MNL IncomeVantage Pro and MNL FIA products. While the FIA market has taken a multi-asset index designed to identify portfolio of them can really help navigate investors turned to registered index- RetireVantage, as well as its new MNL recent tumble amid the low interest rate changes in the economic cycle and most market environments,” said Dadlani. linked annuities and fixed-rate deferred Accelerate 5 fixed index annuity which The ESG index targets firms with the environment, the demand for RILAs shot rotate asset class allocations to perform annuities for the balance of downside launched on 30 March 2021. MNL relevant risk management tools and are up in terms of sales by 38% in 2020, in varying market environments. It uses Registered index-linked annuity (Rilas) protection and investment growth.” Accelerate 5 is only available through focused on reducing environmental risks. compared with the previous year.

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NEWS: AMERICAS NEWS: AMERICAS UBS bolsters QIS with put-write strategy, US regulator orders JPM Securities to pay introduces decrement in US settlement fee UBS’s quantitative investment strategies (QIS) team has developed a fully funded put- An arbitration panel of the US watchdog Financial Industry Regulatory Authority (Finra) write strategy for qualified wealth management clients, offered as a unique alternative has ordered J.P. Morgan Securities (JPMS) and two of its ex-brokers to pay US$19m in with features that adjust market exposure for various market stress scenarios. damages to an elderly investor of structured products.

The Swiss bank’s global QIS team, which as compensation for the decrement based on research-driven themes has Beverley Schottenstein, a Florida-based duty, constructive fraud, fraudulent Under Florida law, JPMS, along with is housed within the firm’s investment reducing the index return. grown over the past couple of years senior investor, was initially seeking misrepresentations and omission. the ex-brokers were held liable for bank, is dedicated to developing as clients have sought outperformance US$10m in compensatory damages as abuse of fiduciary duty, constructive innovative solutions for its largest and “UBS has recently utilised decrement (alpha) and speed to market.” well as punitive damages in her arbitration The US$19m includes a US$4.7m fraud, fraudulent misrepresentations most sophisticated investors. indices in yield or defined return claim, within her capacity as an individual amount which will be paid by JPMS in and omission, as well as elder financial products when components of the Much of the bank’s growth stems and trustee of her revocable trust. compensatory damages, US$4.3m to abuse. In the US, the strategy was driven by decrement index are well known from expanding its structured product rescind a Coatue Private Equity Fund a client need for return stability and companies with established high cash development and origination capabilities Schottenstein belongs to the family that investment along with return capital calls The Commodity Futures Trading optimised risk-adjusted returns. It targets flow business models and that have while improving distribution capabilities owns holding company Schottenstein already paid to Coatue, and US$9m is Commission (CFTC) has previously qualified UBS wealth management an expectation for double-digit return into both external and internal channels. Stores Corp. Avi and Evan Schottenstein, to be paid by Evan Schottenstein to his ordered J.P. Morgan Chase Bank to pay clients and is being offered as a private growth. Here the decrement feature the two former JPMS registered brokers grandmother in compensatory damages, a US$65m civil monetary penalty for placement. improves the risk-return aspects of the In addition, UBS intends to further partner named in the suit, are also the claimant’s apart from US$172.6k in costs. attempted manipulation of the US Dollar product,” said Glicksman. with third party issuers and leverage new grandsons. International Swaps and Derivatives Challenging market conditions amid technology and platforms to achieve its Avi Schottenstein is also required to Association Fix (USD Isdafix) benchmark. have proved to be obstacles for leading In terms of additional themes that are growth ambitions. The claim alleges that Schottenstein’ pay US$602k to his grandmother in According to the CFTC, the bank doctored players such as UBS in its development steadily gaining traction across the North grandsons acted without authorisation in compensatory damages. He spent nine false reports and attempted to manipulate of structured products, and its ability to American market, ESG, 5G and vaccine The bank notes that a growing demand buying and selling securities (for which years in the industry which includes a stint the leading global benchmark over a five- offer conservative clients compelling development are among the top themes for yield and the desire to take their employer was a market maker), new as a Morgan Stanley broker prior to JPMS. year period, dating back to January 2007 products that provide full downside for structured products at UBS. advantage of tactical opportunities made issue offerings in preferred securities through January 2012. market risk protection. 2020 conducive to structured products and debt, auto-callable structured notes, Evan began investing his grandmother’s Glicksman notes other themes including activity and a record year for the bank. among other instruments. money in 2006 while he was a broker with “These advisors are no longer with the “We don’t see that changing in the more economically sensitive markets and Citigroup Global Markets and continued firm, and their actions do not represent foreseeable future, and as such, the sectors that are positioned to catch up In late 2019, the firm established its JPMS, along with the ex-brokers the activity across his moves to Morgan our values as a company,” said a JPM industry has focused on developing in 2021, after underperforming in 2020. Unified Capital Markets organisation were held liable for abuse of fiduciary Stanley and then finally JPMS. spokesperson. alternative defined return strategies,” said These range from cyclically exposed which in part combined structured Eric Glicksman, UBS head of structured eurozone and UK markets, small- and products and derivatives resources solutions for IB Global Markets, Americas, midcaps to select financial, energy, within UBS investment banking and the and GWM Markets, Americas. industrial, and consumer discretionary wealth management divisions. stocks. J.P. Morgan debuts ‘insight’ notes linked to crypto basket However, the low interest rate This enabled the bank to leverage its environment seems to have paved the “[We] see opportunities in the Chinese cross divisional capabilities, effectively J.P. Morgan has issued a new range of structured notes linked to the J.P Morgan basket of companies which provide exposure way for certain thematics that include economy given their progress toward collaborate, and grow market share as to the cryptocurrency market via a basket of stocks. decrement index plays. economic recovery. Finally, there are well as service new distribution channels. opportunities in the travel and leisure The Insight Notes were registered on 10 March by J.P. Morgan Chase Financial Company on the US Securities regulator (SEC). DECREMENT ARRIVES sectors given that the concept of UBS recorded a significant pickup in The two-year capital at risk structure will pay 100% participation on the performance of the underlying basket minus 1.5% basket Decrement indices have gained more ‘experiences over things’ will likely client demand for products linked to deduction. The note, which strikes on 6 April will be available to investors from 31 March from a minimum US$1,000. prominence in Europe as underlyings for become popular,” he said. stocks in the airlines and transportation structured investments but follow a more sectors during 2020, as well as retail The J.P. Morgan basket of companies includes the stocks of 11 US-listed companies that operate businesses that the bank sporadic pattern in the US. CUSTOM INDICES and restaurant sectors as a consumer believes ‘to be, directly or indirectly, related to cryptocurrencies or other digital assets, including as a result of bitcoin holdings, Proprietary indices have also emerged reopening plays. cryptocurrency technology products, cryptocurrency mining products, digital payments or bitcoin trading’. The bank recently adopted the as popular strategies for market linked synthetic dividend feature as part of CDs and indices, where clients are “Looking ahead, the trend of this sector The unequally weighted underlying basket includes MicroStrategy (20%), a company holding more than 90,000 bitcoin; Square its offering since it can impact the cost willing to take exposure but not without will depend on several factors including (18%), a payments company which derives its revenues from bitcoin trading with 3,318 bitcoin in its balance sheet; graphics card of options on those indices to either downside protection. investor sentiment and short to medium maker Nvidia, whose products are used to mine Ethereum and other cryptocurrencies; and Riot Blockchain (15%); and PayPal (10%). allow for a higher contingent coupon term views on when there will be The weights of the reference stocks were determined based in part on exposure to bitcoin, correlation to bitcoin and liquidity. for phoenix autocallables or a higher “Linking structured products to custom comparable demand for stocks in the participation rate for a growth product, indices or baskets that are developed sector pre- vs. post pandemic,” he said.

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NEWS: AMERICAS NEWS: AMERICAS Cboe Vest Gold target income tracker hits Finra: former Merrill Lynch brokers not the market responsible over structured notes sales First Trust has added to its suite of target outcome ETFs, with over U$1.6 billion The Financial Industry Regulatory Authority (Finra) ruled that the broker-dealers in total net assets, with the FT Cboe Vest Gold Strategy Target Income ETF. now at Raymond James were not responsible for the failure to properly disclose the costs of notes that saw some investors incur significant losses. Cboe Vest’s flagship target income a fear of inflation. Historically, when you while still retaining participation in its strategy will be used in conjunction look at gold, it has been a good inflation growth potential.” with the FT Cboe Vest Gold Strategy hedge so you would be able to retain its investment firm, and both preside as 0.75% trail and were billed as low-cost Target Income exchange-traded fund benefits,” he said. According to Chang, there has been senior vice presidents, investments. Both investments in firm marketing that was (ETF). The product with the ticker ‘IGLD’ a significant amount of interest in its were found to not be responsible for the deemed “materially misleading.” seeks to deliver participation in the price IGLD will invest its assets in short-term target buffer last year, but noted a stark firm’s failure to properly disclose fixed returns of the SPDR Gold Trust (GLD) and US Treasury securities, cash and cash distinction from the first quarter of 2021 costs related to its strategic return notes Finra also fined the firm US$5m over produce a consistent level of income equivalents and in the shares of a wholly compared with that of 2020. product which in turn, led to grave losses the same disclosure issues, while the that exceeds the income generated by owned subsidiary that holds FLexible for some investors. brokers sold approximately US$150m an investment in one-month US Treasury EXchange Options (FLEX Options), “In 2020, the reason for such growth was worth of the notes to around 4,000 securities by approximately 3.85% on an referencing the price performance of GLD. to hedge against a potential COVID-19 Finra agreed to the requests of two Merrill Lynch reached a US$10m customers. The arbitrator said that the annual basis. crisis,” said Chang. “What we’re seeing former Merrill Lynch brokers to expunge settlement with the Securities and brokers ‘testified credibly that they Through these investments, the fund now is more of a tactical move from our a customer complaint over unsuitable Exchange Commission in 2016 for its performed necessary due diligence Cboe Vest, the asset manager partner of will aim to provide returns linked to the clients who getting into our strategies more sales of structured products in a case responsibility for misleading statements before they recommended the Strategic Cboe Global Markets, will manage and performance of GLD. The fund will also from a calculated standpoint due to interest detailing the degree to which they in offering materials provided to retail Return Notes for the customers’. sub-advise the fund. seek to generate income through a sale rates, as opposed to a macro factor.” should bear responsibility for the investors for structured notes linked of call options on GLD. transgressions of their firm. to the Investable Volatility Index, a ‘Neither (…) was responsible for the According to the chief operational Cboe Vest’s target income strategies proprietary volatility index created by failure of Merrill Lynch and BOA to make officer at Cboe Vest, Jeffery Chang, Via this call selling strategy, a portion of have been on demand in the first quarter The Vermont, US-based brokers joined the bank and calculated by the Chicago the requisite disclosures concerning the investing in gold as an asset class the upside price return of GLD can be of 2021 driven by the need for yield Raymond James & Associates in 2016 Board Options Exchange (CBOE), fixed costs associated with the Strategic offers great diversification benefits converted into current premium income. among investors, according to Chang. after leaving the Bank of America owned which had a two percent commission, a Return Notes,’ the arbitrator said. as the large equity pullbacks have actually outperformed products such Karan Sood, chief executive officer of “The idea that more advisors or clients as investment grade bonds when it Cboe Vest said: “For some investors, are either nearing retirement or actually concerns hedging against downturns. the biggest criticism to gold has been going into retirement means that this the lack of yield. IGLD seeks to change need for income is actually increasing in “We’ve seen record amounts of monetary that. Investors are now able to a landscape where the actual supply of US provider rolls out world’s first accelerated and fiscal stimulus and this really spoke to potentially derive income from gold income products is decreasing.” ETFs with protection

Innovator ETFs has launched its new line New developments such as the SEC’s “These clients need assurance that their of Accelerated ETFs, the first of its kind to [Securities and Exchange Commission] portfolio returns a certain amount for them Simon adds structured ETFs to platform offer investors a multiple (2x or 3x) of the derivatives rule has allowed us to now to achieve the lifestyle that they want in upside return of a selected underlying up introduce these types of products. retirement.” Simon Markets has expanded the suite of ETF offerings available on its structured products platform with the addition of First to a cap as well as downside protection. Trust’s Target Outcome ETFs, the second largest provider of actively managed funds in the US. The firm reported recently that According to Bruce Bond, co-founder The new range of ETFs can help assure its target outcome ETFs have grown to over US$1.6 billion, as of the end of last year. The company is also an active distributor of A total of six accelerated ETF products will and chief executive officer at Innovator, investors that they are going to reach the structured products in the US market with more than 5,420 live products worth US$7.9 billion. be listed, four of which will seek exposure these ETFs can prove to be a useful minimum thresholds necessary in order to the SPDR S&P500 ETF Trust (SPY), while tool for investors in a low-to-moderate for them to meet their goals, according to First Trust is initially offering on Simon’s ETF Marketplace buffered ETFs tied to the SPDR S&P 500 ETF Trust as well as the FT the other two will be tied to the Invesco growth equity market environment Bond. “We think that they're going to be Cboe Vest Growth-100 Buffer ETF, based on the Invesco QQQ Trust, Series 1 (QQQ), and FT Cboe Vest International Equity Buffer QQQ Trust (QQQ). whereby advisers are preparing for the very powerful, as a planning tool going ETF, based on the iShares MSCI EAFE ETF which were launched in September, ‘with additional offerings in the pipeline’. lowest equity returns recognised in the forward.” The Accelerated ETFs launched 1 April past decade. The US platform has been actively expanding its reach in the US annuities markets over the last 18 months most recently with the 2021 and enable advisers to accelerate The idea for the new ETFs came to fruition addition of Global Atlantic Financial Group, as well as Great American Life National, Raymond James Financial, and multi-carrier a portfolio’s equity performance to “Clients that are putting together portfolios when the firm was planning on entering sales offering, Insurance Technologies FireLight a cap. They feature a potential for that have a target and they have a certain the defined outcome market. However, outperformance in the event that the amount of assets that they want to regulatory issues prevented filings for underlying returns less than the initial cap. accumulate by a certain time,” said Bond. these products to be officially rolled out.

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NEWS | APAC NEWS | APAC Exclusive: HKEX to launch DLC segment Thailand SCB climbs in distributor ranking The Hong Kong Stock Exchange (HKEX) is working on the framework to enable Siam Commercial Bank (SCB) has doubled its structured note offerings to 693 in the listing of daily leverage certificates (DLCs) involving liquidity provisions and 2020 with an increase in sales of 35.2% year-on-year (YoY) amid an overall scale- underlyings, having received a number of proposals from potential issuers. down in Thailand.

he bourse is in the process “The SFC didn’t think the Hong Kong knockout risk or be exposed to changes The Thai bank’s outstanding balance of as high-net-worth individuals (HNWIs), as NEW UNDERLYINGS of implementing the project market was ready for DLCs [in 2009],” in the implied volatility and time decay. structured notes dropped by 57.3% to required by Thai regulations. Besides the traditional underlying after spending ‘quite a bit of the source recalled. “It was worried that Some of the main risks derived from THB434m (US$14.1m) as at the end of assets, SCB introduced the shares of time’ in settling the delisting some investors wouldn’t fully understand DLCs include a compounding effect and 2020 from its highest level in the year - The commercial bank kicked off the year Gulf Energy Development, an electric of hundreds of structured the product structures and end up airbag mechanism. Gains and losses are THB1.02 billion recorded a quarter ago, of 2020 with a strong momentum with power generation company, amid Tproducts, which were triggered by US holding them for weeks because DLCs compounded over periods of more than which was close to the level posted in 149 products filed in the first quarter, growing demand for renewable energy sanctions in January, according to three posted certain path dependency issues.” one trading day for DLCs. As a result, Q1 20, but 72.8% lower YoY, according to 84% higher quarter-on-quarter (QoQ), assets. The shares were linked to 36 senior market sources. investors may suffer in substantial losses SCB’s financial statements. according to SRP data. Following the NPPNs sold at THB258m, all of which Despite the trading dynamics of leverage in a volatile market with a sideways trend March crash, it offered 218 notes in the except one were marketed after the “The product development is expected products in Hong Kong SAR, potential if a DLC is held for longer than a day. Phatra Securities and CGS-CIMB second quarter - a record high in the March 2020 sell-off. to take another six months or more. No restrictions on DLCs may kill the products’ Securities retained their leading positions last two years. clear timeline is available yet,” said one attractiveness. Inline warrants were cited At the same time, the airbag feature will in the distribution ranking despite the Also, in October, the bank as the first in of the sources, adding that the launch of as an example where the underlyings are be triggered if the underlying moves slow-down in market activity, while SCB Along with the growth in issuance, the Thailand introduced the Thai Overnight DLCs is likely to take place next year as limited to Hang Seng Index and the five against the product direction to a took over Thanachart Securities as the number of underlyings featured also Repurchase Rate (THOR)-linked it ‘takes time for a series of steps to be most traded stocks on HKEX, and where certain degree, between -20% and 20% third most active distributor on the back rose to 70 in 2020 from 41 in 2019. structured notes as an alternative with achieved, including the establishment of the minimum duration is set six months, depending on the underlying type, as of its market growth in 2020. Oil & gas remained the most favoured ‘reliable yields’ for every client segment. listing rules and trading platform as well which hampers the warrants’ price regulated by the Singapore Exchange – sector followed by travel & leisure and Investors subscribing the notes included as marketing’. sensitivity, according to the source. in such events a trading suspension of Thailand saw its overall structured note technology at the expense of basic PTT Global Chemical and SCB Asset 30 minutes also comes into effect. issuance in the market shrink by 43.1% to resources and G10 currencies. Management. HKEX was reported to mull the launch of MARKET VIEWS 4,791 in 2020 YoY, which led to a 29.4% the DLC segment in mid-2020. The delay As the DLC launch is underway, current “Given the increasing number of Chinese decrease of sales volume at THB50.4 The shares of Minor International were ‘Particularly amid the high volatility is partly due to other events in 2020 issuers of leverage products in Hong tech IPOs in HK in recent years, there’s billion, SRP data shows. featured in 35 out of the 52 non- of yields from international financial which shifted the structured product Kong SAR are looking forward to the new more interest in those names for warrants principal protected notes (NPPNs), markets, Thor-linked structured notes team’s focus, including the shortening of opportunities these products will bring to and CBBCs,” said Chan. “It is good timing All structured notes offered by SCB which generated THB242m in 2020. In reflect Thai baht liquidity and offer an the structured product trading life cycle the market. to expand the types of products investors are issued either in-house or by its the meantime, there were 44 products interesting choice for investors amid the and the ‘structured product connect’ can choose from.” sister company - SCB Securities. The linked to equity baskets covering current financial situation,’ said Wasin scheme initiated by the Financial “DLCs will complete the leverage product securities house slightly increased its Microsoft and Alibaba ADR. Saiyawan (pictured), chief wholesale Services Development Council (FSDC). offerings in Hong Kong SAR because the More issuers are considering their issuance of structured notes to 216 banking officer at SCB. warrant and callable bull/bear contract choices including new players in the from 197 in 2020, with a sales volume of Meanwhile, the USD/THB currency pair, DLCs, known as constant leverage [CBBC] market here has fully matured, DLC space in Asia like Vontobel which THB2.5 billion and a market share of 5%, which was the most used underlying The bank reported a consolidated products or factor certificates in Europe, which is manifested by the trading has a decent presence in the leverage SRP data shows. asset in 2019, only appeared in 22 net profit of THB27.2 billion in 2020, give investors a fixed leveraged return activity,” Keith Chan, head of cross asset products market in Hong Kong SAR. products in 2020. The most popular 33% lower YoY, mainly due to higher based on the daily performance of an listed distributions for APAC at Société Majority of the notes are sold as short- underlying was the shares of PTT, a Thai provisions. The Q4 20 contributed THB5 underlying stock or index. Singapore Générale, told SRP. “Hong Kong SAR is ready for the launch term ‘structured debentures’ with a state-owned oil and gas company, which billion of the net profit, a 9.8% decrease Exchange was the first to list the where the leverage products are applied tenor of less than 270 days and are only was linked to 126 products in 2020 – up YoY or a 7% increase QoQ driven by products in Asia in July 2017, offering a The fact that DLCs are less complex than with one of the highest standards when it available to institutional clients as well from 26 in 2019. higher net fee income. leverage return of 3x, 5x or 7x through a derivative warrants (DWs) and CBBCs comes to liquidity provision requirement,” ‘long’ or ‘short’. from a product term perspective will be a said Simon Yung (right), head of financial plus, especially for investors who prefer products public distribution for Hong “HKEX is committed to maintaining its simpler products, according to Chan. Kong SAR at Vontobel. leading position as the world’s largest structured products market,” said a HKEX The French bank is the sole issuer of In addition to a two-decade long spokesperson in an email statement. “We DLCs in Singapore after rolling out the experience of trading leverage products, are always looking at new product ideas, first DLC in Asia in July 2017. It has 201 Yung noted that retail investors in Hong Thailand saw its overall structured note issuance in working with the market and issuers to DLCs on shelf as of Friday. Kong SAR have become less turnover- understand demand, and we commit to orientated and begin to value market the market shrink by 43.1% keeping the market informed on new The DLCs cater to leverage product making quality and product terms more developments in a timely fashion.” investors who don’t want to take upon selecting products.

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NEWS | APAC NEWS | APAC SFC slows down activities at year-end, HS HSBC debuts prop luxury index in Asia Tech Index scores HSBC has launched the Solactive Luxury Dynamic Factors 10% Daily Risk Control TR The Hong Kong SAR regulator has released its quarterly report on equity-linked Index-linked private placement notes (PPN) in Hong Kong SAR and structured deposits investments and structured deposits in the retail market. in Malaysia, to capitalise on the growing luxury consumption in Asia after Covid-19.

The Securities and Futures Commission an investment theme is poised to benefit UNDERLYING (SFC) authorised 18 unlisted equity-linked from a strong economic recovery led by Launched in October 2020, the investments and structured deposits Asian economies in the post Covid-19 Solactive Luxury Dynamic Factors 10% for public offering from October to world, says HSBC. Daily Risk Control TR Index reflects the December, a decrease from 72 quarter- weighted performance of the Solactive on-quarter (QoQ), which led to a stable Equity-linked investments “The index sits within our theme of stocks Luxury Dynamic Factors Index NTR number of 145 as at the end of 2020 benefiting from Asian discretionary (‘the base index’) and a cash position year-on-year (YoY). spending. HSBC Global Research accrued daily by hypothetical investing and structured deposits estimates that the luxury goods market at 3M Euribor fixing. There were additionally 145 CNY- in mainland China will likely achieve 48% denominated unlisted structured growth in 2020, doubling its overall share As of 12 March, the base index products and the number of investment- for public offering of the global luxury market in 2020, accounted for 67.6% of the structured linked assurance schemes (ILAS) with further growth expected through to product underlying and comprised 20 remained unchanged at 300 as at the decreased 2025,” said Justin Chan (pictured), head stocks led by Hermes International, year-end compared with a quarter ago, of Greater China, global markets, Asia L’Oréal and Ferrari, which weighted according to the SFC’s Q3 FY20/21 Pacific at HSBC. 13%, 12.3% and 8.8%, respectively. By report ended in 2020. currency exposure, it had EUR (60.6%), Several versions of the products are “We are also bullish on the sector due USD (14.9%), CHF (6.4%), GBP (6.2%) and The independent statutory body, headed being rolled out with partial or full capital to the likely consolidation seen in the others (11.8%). by CEO Ashley Alder, also gave the green During the quarter, the regulator the technology sector’. The options protection and a tenor of one to two industry and the use of more affordable light to 51 unit trusts and mutual funds disciplined three corporates including subsequently went live in January. years. online sales channels,” he said. Since inception, the Solactive Luxury including 23 Hong Kong SAR-domiciled Goldman Sachs (Asia), which was fined Dynamic Factors 10% Daily Risk Control funds from October to December, a climb HK$2.7 billion for its lapses in 1Malaysia Since then, 225 structured products “The payoffs being offered are The product was rolled out as the UK TR Index has delivered a return of 8.4% from 40 QoQ and 50 YoY. Development Berhad’s bond offerings, have been marketed linked to the Hang growth payoffs with caps in the total bank moves its structured products pa., a volatility of 9.9% pa., Sharpe Ratio as well as Fulbright Securities and Credit Seng Tech Index in the form of single payoff existing for certain variants,” a business from Europe to Asia, as part of of 0.9, maximum drawdown of -22.47%, In January, the regulator entered into Suisse Securities (Hong Kong SAR), index, SRP data shows. The majority spokesperson told SRP. its structural shift to the region. The UK Value at risk 95/99 of -15.5%/-28% and an mutual recognition of funds (MRF) which were fined HK$3.6m and HK$2.1m were distributed by a total of 11 banks bank has significantly raised its non-flow Conditional Value at risk 95/99 of -23.3% arrangement with the Securities and for internal control failures and regulatory in Hong Kong SAR as well as nine from First introduced on 2 March in Malaysia, structured product issuance in Hong and -36.4%. Exchange Commission of Thailand, breaches in its electronic trading China, nine from South Korea (excluding the MYR-denominated deposits are Kong SAR and Taiwan, as SRP reported. which ‘allows eligible Hong Kong systems, respectively. seven equity-linked securities that were Shariah-compliant and available Other Solactive luxury indices in the SAR and Thai public funds to be withdrawn during subscription) and six for HSBC Amanah clients. The PPN HSBC has committed US$3.5 billion for market include the Vontobel Luxury distributed in the other market through a As at 31 January 2021, the net from Singapore. launched in Hong Kong SAR opened for its wealth and personal banking (WPB) Performance-Index, Solactive Luxury & streamlined process’. notional amount outstanding of subscription on 8 March for HSBC Jade business as well as US$0.8 billion in Lifestyle Index and Solactive Jing Daily unlisted equity-linked investments and The SFC also approved the launch of clients, and is denominated in Renminbi. global banking and markets in Asia. KraneShares China Global Luxury Index. As at the year-end, there was no structured deposits for public offering futures and options contracts for four The bank is expanding its distribution ‘other specialised’ non-Hong Kong reached HK$20.28 billion and HK$1.59 stocks - Semiconductor Manufacturing The EUR-denominated index also marks capabilities to target high net worth and There are eight structured products SAR-domiciled authorised fund, which billion, respectively, the SFC latest International Corporation, Alibaba Health the first proprietary luxury-themed index ultra-high net worth investors mainly in linked to luxury-themed indices and included futures and options funds, data shows. Information Technology Ltd, Kingdee in Asia offered by HSBC, which owns the China, Hong Kong SAR and Singapore. funds – ML Luxury and Lifestyle Index, structured funds and funds that invest International Software Group Co and Ping exclusive licence. The bank will ‘shortly’ SGAM Luxury and Lifestyle Fund, World in financial derivative instruments. The An Healthcare and Technology Co. offer such exposure through structured “The growth of the wealth management Luxury Index, according to SRP data. type of fund was last seen on SFC’s DERIVATIVES deposits in China where luxury-themed market is unparalleled in Asia, quarterly report ended in 2019 when one In November 2020, the Hang Seng During the quarter, the SFC posted stocks are not commonly used as underpinned by the expansion in high net They were issued in Europe except one delivered a net asset value of US$145m. Tech Index futures were introduced a profit of HK$269m, up 30.6% QoQ underlying assets. worth population and the increase in their in China - 溢利宝-系列1-中外品牌主题投 to the market after the SFC gave and a recovery from negative HK$39m sophistication,” said Maggie Ng, head of 资/ Yi Li Bao S1. Offered by The Bank of In the meantime, the number of licensees its approval. They were launched year-on-year (YoY). That led to a profit GROWING SECTOR WPB for Hong Kong at HSBC. “Therefore, East Asia in 2007, the uncapped growth and registrants was stable at 47,217 as at by Hong Kong Stock Exchange to of HK$580m for the period from April Luxury spending in Asia, particularly in we are working closely with our global product was linked to the baskets of ML the end of 2020 YoY, of which 3,122 were meet ‘meet the market’s need for an to December, a bounce from a loss of China, accounts for a significant portion markets colleagues to bring innovative Luxury and Lifestyle Index and BofA Merrill licensed corporations. exposure management tool covering HK$203m YoY. of global luxury consumption. Luxury as structured products to our customers.” Lynch China Consumer Brand Index.

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NEWS | APAC EXPERT VIEW Citi Australia expands to meet rising Industry has shown resilience, now it is at structured products demand an inflection point The US bank has opened its second Australian wealth hub in Sydney targeting wholesale investors. The move comes as its sales volumes of structured products Luma Financial Technologies’ European head David Wood talks the evolution of for February reached a four-year high. automation in the structured products market, and the opportunities ahead.

Services License or control gross assets would not be as impacted by or even of at least AU$10m. benefit from the pandemic, such as healthcare,” she said. REFLATION TRADE “2021 has already seen impressive Customers at the bank are currently demand for structured products, with looking to access sectors that may benefit clients wanting to get equity exposure from reflation trade and an economic given the more positive global economic recovery, such as cyclical sectors backdrop,” said D’Souza. “Our sales including finance. With volatility likely to figures for February were our highest in remain a concern for investors until the four years.” Covid-19 pandemic completely ends, The flipside of fully customers will continue to look for ways Structured products offered by Citi to invest in equities with a hedge and are manual processes is Australia has a minimum investment likely to turn to structured products. of AU$50,000. The wholesale clients predominantly favour equity underlyings DIGITALISATION full automation across both local and international The expansion comes as Citi aims Following the launch of its first wealth markets, according to D’Souza. to double the revenue of its wealth hub in Melbourne in April 2019, Citi saw management business over the next investment asset under management “Fixed coupon memory autocallables with three years in Australia. It also follows (AUM) increase by 12%. worst of options have been consistently the closure of the investment bank’s last popular with our clients,” she said. In the physical branch in February 2020 in the ver the last few years, the structured product them. It can be a laborious for all parties. On any given day, an “Structured products make up a significant meantime, the demand of other payoffs, country as it’s in the process of digitalizing industry has responded admirably to regulatory issuer may receive numerous requests from buyside clients to part of our offering to clients, as one of our such as growth type and conditional majority of its banking activities. and transformational change. It has risen to meet, in price a similar product, all in different formats, requiring them to most popular products,” Nandita D’Souza coupon type, continues to evolve certain cases, extreme challenges. Now, however, respond differently to each one. (pictured), head of investment specialists depending on clients’ views on markets. "While 95% of Citi's banking interactions it faces an inflection point. Divergent approaches to at Citi Australia told SRP. have been happening outside of Otechnological adoption have created a patchwork system able to Of course, this multiplication of inefficiency does not end “During the height of the pandemic branches for a number of years, our function year-to-year, but in a fashion that risks stifling long-term there; it runs through the entire manufacturing and distribution These products accounted for ‘a clients preferred deeper kick-in barriers high-net-worth customers still value innovation and perpetuating processes which produce uneven process, rendering onerous and time consuming everything from significant portion’ of the AUM growth and exposure to defensive sectors that face to face interactions,” said Gofran service levels and lifecycle management inefficiencies. evidencing best execution to decision reviews. It does not help while fixed income and term deposits Chowdhury, head of banking and wealth that some of the tools utilised are fragmented and, in certain were also key asset classes. In addition, management distribution at Citi Australia. The root cause of many of the issues lies in the bifurcation cases, not necessarily fit for purpose. the number of average transactions at Citi between the automated and manual processes the industry Australia has doubled in Melbourne since “As a result, we've built a tailor-made has adopted over the years. By and large, the banks have Crucially, all these inefficiencies create expense. For the banks, the wealth hub was opened. space where we can deliver a strong embraced one or the other, creating a twin-track system that has the base level of costs associated with an entirely manual Structured level of personal engagement for these inadvertently embedded inefficiencies and variable service levels process mean there is a high hurdle rate to clear before a new To qualify as a wholesale client, investors clients as we work together to provide across business workflows. product would make economic sense. As a result, there tends to must earn net assets exceeding AU$2.5m products make investment guidance and manage their be a narrow concentration around products with mass appeal – or gross income at least AU$250,000 wealth," he said. Traditionally, of course, processes have been entirely manual. i.e. autocalls – and those which, while attracting a smaller client pa. or over the last two financial years, as up a significant These are resource intensive and relatively inefficient, something base, generate much larger trades. Consequently, innovation regulated by the Corporations Act 2001. Citi reported a net income of US$4.6 that is evident from the product development stage all the way is frequently challenged by the minimum costs of product part of our billion for Q4 2020, down seven through to product maturity. Structured product desks at private development and distribution. Alternatives include an investment of percent year-on-year, while its revenues banks still cultivate product ideas individually with multiple issuers AU$530,000 (including fees) in one offering to clients decreased 10.3% to US$16.5 billion because they lack a single venue to test and price concepts The flipside of fully manual processes is full automation. Many transaction subject to certain criteria mainly due to lower revenues in global across the market. Relationship managers must present ideas issuers now have single dealer platforms which price and trade and being classified as a professional consumer banking, institutional clients back to the client with all the suitability controls, procedures and standard products such as autocalls and reverse convertibles. investor who hold an Australian Financial group and corporate or other. documentary evidence required, with no single hub to store These can make the initial process of price discovery,

20 www.structuredretailproducts.com www.structuredretailproducts.com 21 EXPERT VIEW documentation generation and distribution relatively fast and Efficiencies can also be made once the product has been efficient as it is based on one product, one investor. But while created. Often, the processes around managing the financial technologies these platforms allow for certain enhancements – the addition subscription, the orders, the book building and finalising the of more underlyings, for instance, providing flexibility on the settlement are performed manually by issuers. It can involve inclusion of new stocks – they do not facilitate the creation operations teams managing the breaks and inefficiencies of new products. The challenge here is that new products that may appear through the process. Having a workflow that require, as with the existing products on the platform, fully normalises that but is not tied to straight-through-processing automated pricing, documentation and regulatory processes, will help this process become much cleaner. Ultimately, as well as trading. For an investment bank, adding new volumes should grow on a particular product, giving issuers the products would represent a huge investment of time – perhaps incentive to invest in automating rather than semi-automating six to 12 months – and capital. Given the nature and size of that product. That would help break the current impasse, the investment required, a bank is likely to expect P&L-moving where investment is lacking because the volume does not volume within a few months of going live. The risk of that not justify it, but the volume is lacking because the service level happening is, understandably, one few are willing to take. does not make it worthwhile.

So how does the industry move forward? The answer lies Solving the problems during the manufacturing and distribution in the middle ground between manual and full front-to-back stages is critical to managing the lifecycle of a product. automation. That, in effect, means streamlining core elements Whether it is a bespoke deal for an individual investor, of the process to allow companies to innovate and provide which might be highly standardised, or a customised deal scale on a lower cost basis. for 500 investors, the client service expectations of lifecycle management remain the same. What is its value, what is its Part of this would involve reducing or removing some of the performance, should I still hold it, and how does it fit within costs for both the buyside and the sellside through tools that my portfolio? All these are common questions that must be allow them to operate more efficiently without significant upfront answered irrespective of trade size. While there are many investment. Standardising price requests for non-standard variations in the manufacturing and distribution elements of products, for example, would allow unautomated banks to the process, as soon as a product is placed with an investor it respond to buyside clients in a more consistent and scalable is crucial it is serviced in a highly efficient, highly standardised way. If both sides use common platforms, there will be more way. These are living, breathing assets which need to be predictability, giving issuers the comfort that clients will request actively managed in a client’s portfolio. information in a very similar way, not in numerous different ways. The industry has undoubtedly proven its resilience in recent Documentation, a critical component of workflows, is another years in the face of daunting challenges, partly through key consideration. Product ideas must be accompanied by, the deployment of technology. Now we must ensure that among other things, a term sheet, a KIID and the appropriate automated platforms and processes do not oblige banks and regulatory documents, and many issuers use third-party wealth managers to duplicate tasks in perpetuity, while also service providers to help them to deliver and build on those. tackling the lack of automation in other areas which preserves But issuers still must have multiple connections to multiple costs in the system and discourages innovation. Ultimately, clients to send all those documents and manage that flow. By we all want to see less fragmented service levels and better using platforms that can retrieve that documentation on their lifecycle management, but these outcomes will be hard to behalf wherever required, document generation can become achieve without solving the problems in the manufacturing and a one-time piece of work for them, eliminating the need to pay distribution stages. Doing so will be an ongoing and active multiple times to provide the same information. journey, but it is one on which the industry must embark. Expand and grow your Structured Products and Annuity business Solving the problems during the with Luma manufacturing and distribution stages is critical to managing the lifecycle of a product Discover new opportunities today! LUMAFINTECH.COM

22 www.structuredretailproducts.com SRPInsight

PROFILE PROFILE

“The decumulation space has been particularly active over the last few Profile: FNZ Q-Hub - servicing QIS and AMCs months and we have developed some with a customised touch very interesting capabilities.” According to Cegarra, the increasing Operational risk can FNZ was founded as a start-up business in 2004 in New Zealand. interest in decumulation comes from both investors and providers. be very punitive for From an individual investor’s perspective, traditional general account “This approach is very powerful because account management, trading, and back- solutions have become less appealing providers the company can have a more strategic office capabilities. given the reduction of the guarantees impact on financial institutions, including and rates offered. in terms of cost savings: the business According to Cegarra, when FNZ model is based on bps on AUM as approached him, the opportunity was “very “Even more so given that they do not opposed to large fixed software licensing aligned with what I had tried to build over provide any potential upside to the With personal needs, goals and life which are even more operationally fees,” says Cegarra. “It is important for the the last 22 years on the sell-side and a markets,” says Cegarra, adding that for expectancy, individuals are no longer intensive – our proposition around company to be aligned on the success, very good fit overall - same solutions, same example, in France, the guaranteed yield comfortable with static one-size-fits-all AMCs is based on a lighter version of and risks, of its partners and clients. clients on the buy-side in addition to my for the fonds en euros has about halved solutions, which creates technology and those, purpose built for AMCs,” says previous colleagues on the sell-side, and a over the last six years. operational challenges. Cegarra, adding that the related key “This allows us to customise the platform great team with a strong track record and challenge that needs to be addressed to meet the needs of each client across even stronger values and principles”. From a provider’s perspective, the The other aspect is around client by product providers is operational risk. technology (software) but also in terms same general account solutions engagement and the presentation of of investment administration and asset He joined them on February 2020 are increasingly challenged from a relatively sophisticated investment “Operational risk can be very punitive servicing.” to head Q-Hub, the firm’s broader regulatory capital perspective, and the solutions and the choices provided to for providers if they miscalculate/mis- structured investment platform, which lower yields guaranteed on the liability end clients - typically with the help of an aggregate thousands of AMCs on their The company has now more than includes iProtect, with a mandate to side and government bond yields advisor, in a way which can be properly balance sheet both in terms of potential US$800 billion of assets under develop and move the platform to the available on the asset side. understood. losses and in terms of capital charge. administration from over 100 clients next level with his team. As part of our standard service, we globally including Standard Aberdeen, “Given such evolution, we have seen “To that end, we have done a lot of underwrite such operational risk on behalf Barclays, Generali, Zurich, Vanguard, and “Our mandate is to accelerate and insurance companies, banks and work on digital tooling, which is made of our clients and provide the operational riginally created as a Singapore’s UOB. expand our role as facilitator of asset managers work on innovative available to our clients on a customised risk cover directly from the balance sheet business unit within the structured investments: beyond decumulation solutions for investors and white-labelled basis, aimed at of a robust financial institution.” New Zealand branch of ICPPIS AND ITIPPS individualised protection to cover with the aim to combine protected striking the right balance between Credit Suisse investment FNZ also houses iProtect, a module the full long term savings spectrum income with some upside exposure providing a comprehensive picture of The third aspect of the Q-Hub offering bank, the firm is backed which was initially launched as a solution (accumulation and decumulation, to the markets,” Cegarra says. the benefits and risks of the solutions, of is the digital interface to deliver the Oby Caisse de Dépôt et Placement platform to support individualised protected or not), as well as QIS, “While working with distributors, the trade-offs related to the choices, and product to the audience, the input from du Québec, Singapore’s Temasek, protection transactions from a including actively managed certificates, manufacturers, investment banks in a way which is intuitive, engaging and the manager or advisor going into the Generation Funds - the venture capital technology and operational perspective and leverage finance,” Cegarra says. and other hedge providers on such never misleading,” says Cegarra. “The AMC, the distributor and all the way to fund of former US vice president Al Gore, - aimed at iCPPIs and iTIPPs. solutions, in addition to facilitating the reception of such type of tool has been the end client for pre- and post-sale as well as its employees. Q-HUB operational management and hedging really strong”. engagement. “Although FNZ may have kept a relatively FNZ’s Q-Hub provides technology and of the underlying product, our services SRP spoke to Walter Cegarra (pictured), the low profile, it is servicing some of the operational services to support long have been in particular requested Q-Hub offers specific capabilities and “People don’t want spreadsheets or former managing director - global head of largest tier 1 institutions in the market,” term savings, QIS and leverage finance. around individualisation and digital tools to support decumulation solutions exchange of emails,” concludes Cegarra. QIS structuring at Credit Suisse who joined says Cegarra. “The first time I came engagement.” under a module called “RetireProtect+”. “In the world of Uber, Deliveroo and in early 2020 as chief executive of FNZ’s across the iProtect team was at Credit Long terms savings is the firm’s other mobile apps, clients expect their Q-Hub, the firm’s structured investments Suisse - we were developing an iCPPI traditional area of expertise, in particular THE FULL LIFECYCLE QIS AND AMCS financial interactions as automated and platform, about the increasing use of for an Italian insurance company and in the individualised protection space. Cegarra notes that for solutions which On the QIS side, FNZ Q-Hub focuses user friendly as the ones they have for technology for investment administration they had selected iProtect technology are very long term by construction and on the support of actively managed their private life. and asset servicing. and operational platform.” “This is the origin of the iProtect combine accumulation and decumulation, certificates (AMCs) and actively managed platform. But certainly, over the last year known in the UK as “to and through” indices (AMIs) with services designed to “We have a lot of requests from clients FNZ is not the usual software-as-a- The firm has been around for over 15 we have seen increasing interest for retirement, clients want to be able to facilitate the technology and operational asking to design the digital interface service (SaaS) provider but a platform years as a financial technology and different types of solutions, in particular provide their advisors and end clients resources to manufacture, hedge and between them and their distributors, as a service (PaaS) company offering operations provider offering services around decumulation, and different with the ability to customise the solution, distribute these products. and the distributors and their clients, technology solutions together with the to the wealth management space by types of pay-offs, including option- “not only at the time of the initial in addition to our services around the supporting infrastructure and operations delivering the full platform value chain based MaxNAV protection which we subscription, but even more importantly, “We already power some of the leading manufacturing, rebalancing and hedging as a single managed service. including front-end, on-boarding, also support,” says Cegarra. through the whole life of the investment”. retail brokerage platforms in the UK of the products themselves.”

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FEATURE FEATURE

Our risk appetite is mid- to low, and that is also reflected in the types of BBVA shifts gear as equities chief plan products we are doing. Before we were concentrated on a small catalogue of gains momentum very popular underlyings and long-term products. With the new set up we have Our new ‘factory’ approach The Spanish bank hit several milestones throughout 2020 in its strategy to build a winning strategy because we have more capacity and are well positioned remained on track up its offering and reach to become a global market player. to capitalise on new opportunities and manage our books more efficiently. throughout the year. We have also seen how some business products clients wanted to unwind. set in motion and remained on track models across the market had to be However, with the market rebound throughout the year. reviewed and restructured which has client activity was reignited – this lasted also opened opportunities for us and until the end of the year. Our year-end The progress we are making on our other players. they provide a good entry point and that, we want to increase our presence results showed continued growth on our strategy can be seen on several prospect for growth as the economy and return to other markets such as Italy structured products business.” milestones we achieved in 2020. There is a clear shift in the market begins to recover. and the Nordics. More recently we introduced new towards indices that embed risk The distribution business (both private 3a2 notes targeted at US onshore management capabilities such as INNOVATION In France which was very focused banking and retail) remained invested with clients, increased our public offering volatility control, synthetic dividends. Innovation on payoffs continues to be on long-term products aimed at retail very few requests to unwind positions across Europe with a specific focus on Obviously, there is a trade off as limited. The investor understands the distribution networks, we want to be more and went back to normal levels of activity the French market, and we continue the investor will not be paying for narrative of the autocall and the Phoenix involved on the public distribution side - relatively quickly, according to Domínguez. to develop our range of investment estimations on volatility, and the payoff autocall, and providers can deliver we are working with domestic distributors products to reach all the markets in structure will be based on participation returns with this type of product. It is very to increase our footprint, and also target “On the other hand, there were a higher which we have a presence. (ie European call option with a put difficult to move away from something insurance providers across Europe with number of requests from institutional spread). As a consequence, for every that is working for product providers and a full derivatives catalogue including investors seeking liquidity as they moved Our QIS business line is a good example new QIS index that we launch there is investors but there has been an effort from equities but also credit, rates, FX as we ast year was a difficult and to cash. Overall, the institutional market of the work we are doing. We are not a risk control and synthetic dividend the industry to innovate on the underlying think our offering can be competitive. challenging year for many was somehow subdued and remained only developing new indices such as our version so we can offer more efficient side and there are many examples around manufacturers as the market cautious over a longer period,” he says. Solactive BBVA ixESG Global Leaders investment products to our clients. indices but also around baskets, on As we expand our reach, we want to volatility triggered by the Covid EUR Index which we launched in 2020 or providing appealing entry points, on the target other markets such as Austria and pandemic resulted in heavy “It is fair to say that the recovery was the recent Climate Transition Benchmark WINNERS AND LOSERS use of downside and coupon barriers. The Netherlands where we are already Llosses for those exposed to long-term spearheaded by the US market after the ones that we have just presented but also The winners after the crash and the main working with domestic financial firms. risk on their books. Some issuers, historical falls on some of their market developing a variety of ways to make drivers of the rebound were US tech Thematic investments are also proof however, were able to capitalise on the cap flagship indices. Investors across them investable for our clients – we have stocks which were able to capitalise on the of how the market is moving from the We are also changing our approach turmoil and reposition their offering. the board saw an opportunity as soon as a new mutual fund in the pipeline linked lockdown/work-from-home environment. traditional market cap approach. The on our more traditional markets such some of the US stocks began to recover to our first index as it is the preferred reason why these underlyings are gaining as Spain and Portugal where the retail SRP spoke to Juan Ramón Domínguez, and even European-centric institutional wrapper by institutional investors. The FAANG (Facebook, Amazon, Apple, traction among retail investors is to do activity has been significantly low over the (pictured), European head of equity networks shifted their attention to US Netflix, and Google) companies took the with the fact that you have a story behind last few years but demand for products structured products sales at BBVA about underlyings, especially during Q4 20.” NEW PHASE lion’s share during the second half of to tell and that it is easily understood. from private banking is increasing. the progress made by the Spanish bank It is fair to say that the arrival of Roberto 2020. However, we also received many as it moves from an “opportunistic” STRATEGIC PLAN Vila has resulted in the equity business requests for products linked to other tech We have added several features to our Beyond the European markets, the growth approach to a “factory set-up”. The pandemic hit just as we were starting moving into a new phase of development firms involved in payment methods (PayPal, Phoenix offering with boosters, twin-wins in US and Latam is being impressive and to implement our new global equities and perhaps was the missing link to Mastercard, American Express), and non- which have been very successful and there are also specific plans regarding The Spanish bank remains a small strategic plan. We had to slow down a move BBVA into a different level. In tech firms such as mining companies as come hand in hand with the increase wrappers and products to capture a player compared to the main tier 1 little at the beginning but over the year the past, we were more opportunistic well as pharma and healthcare companies. of our digital capabilities. We have also higher market share. Mexico is being very manufacturers of structured products we achieved a wide range of mobilisation whereas now we have a focus and a Towards the end of the year we saw an worked on ways to deactivate the risk successful in the distribution of warrants globally, but is working on an ambitious across a range of work streams – roadmap with clear objectives to become increasing interest in European stocks as via daily range autocalls which have linked to our QIS indices and there is plan to expand its reach and compete e-connectivity and digital transformation, a market reference when it comes to part of either global baskets or European been well-received by investors and room to replicate the model in the rest of with the main structured products the addition and coverage of new investment products. baskets and semiconductor stocks as a they make sense in the current market Latin American markets by leveraging the houses in the short-term. Our year-end underlyings and payoffs, new business theme which has continued into 2021. environment. bank’s high-street presence. We have results showed continued growth on our lines such our QIS and ESG initiatives, We wanted to have a diversified also resumed our activities in Asia and structured products business. new wrappers, risk management etc. underlying coverage and reduce the From an underlying stand-point the GOING FORWARD we are now setting up the capabilities risk on our books with more short-term losers of 2020 were the most traditional We want to grow our market share in to move one step forward in terms of “From a business perspective [2020] Our new ‘factory’ approach aimed at our products and we have adapted the sectors which suffered to gain traction markets where we have a presence volumes and payoffs and of course, was a good year,” says Domínguez. “We distribution and institutional businesses business and teams to move in the right although we think they are well such as France, the UK, Germany, there are plans to increase our equity focused on providing liquidity to those across different geographies was direction. positioned to drive activity this year as Switzerland, and Portugal. In addition to derivatives activities in Turkey.

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FEATURE FEATURE

said Despagne, adding that more its structuring capabilities to respond Energy Revolution and Environmental than €6 billion euros have already to demand for alternative structures Justice and one on China stocks,” said SRP 2021 Awards - SocGen racks up €15bn been raised. to navigate last year’s events across Despagne. distribution channels. on decrement, and counting “ESG wrappers also are a key The Tetris Index was designed to hedge investment theme in which we will “Private banks have been asking for the tail risk on the US equity markets continue to invest and grow. Positive alternatives to autocalls on worst of. at a reasonable cost (low carry) – it SocGen received several SRP accolades in this year’s SRP Europe Awards Impact notes, Charity notes or Because of their risk on the worst, but outperformed the SP500 by 37%). including Best House, Europe, Best House, Equity, Best House, Autocall, Best Reforestation notes have proven very also because of correlation levels. We successful this year.” have developed successfully new pay- “It offers a long volatility exposure House, Interest Rates, Deal of the Year - Positive Impact Note on Solys Euro offs such as ‘New Put Down and In’ or when the market falls, with liquid and Evolution Fund Awards. POSITIVE IMPACT ‘Daily Accrued Put’ to get the same level transparent plain listed vanilla options,” The bank has also allocated more of coupons, while offering a different risk said Despagne. than €1.5 billion to “Positive Impact” profile at maturity.” notes, including the “SRP Deal of the Despagne has a positive market outlook year 2021” – the Solys Euro Evolution Despagne notes that 2020 was also about and remains confident SG’s capabilities I Fund, the first structured Positive QIS, and delta one strategies. “Investors and technology infrastructure will help Impact notes dedicated to support were looking for hedging, or decorrelation the bank to increase its reach and projects in Africa. which we successfully provided through market share - the SG Market is already our best trading strategies and investment used by most of the bank’s clients, and “SG committed to match each note thematics,” he said. “soon they will even have access to a amount with an equivalent amount of complete lifecycle management tool”. loans to finance hospitals and water “Investors have been looking for an Private banks treatment facilities,” said Despagne. alternative to cash. Our Carbone arbitrages “Because the worldwide lockdown, notes raised more than 2 billion euros.” technology has been key to maintain “More than 1 billion of charity notes a very high level of service,” he said. have been asking have been issued, enabling donations Some of the strategies in focus included “Fortunately, over the last years, we to charities involved in various areas of a Long/Short Strong vs Weak Balance massively invested in automation. general interest such cancer research, sheet play, a Green deal baskets Another strong technological for alternatives to child welfare, support for people with structure as well as hedging strategies development we have been offering our disabilities, the fight against housing such as Tetris. clients is our API. autocalls problems”. The bank’s Green Deal Indices have “In the past, structured products were The Solys Euro Evolution I Fund been designed in partnership with SG mainly used by private banks and retail appears in 176 live products sold in Research - the European Green deal banks. Now we also see very significant France with an estimated outstanding Index which outperformed its benchmark flows coming from discretionary portfolio volume of US$719.61m. (Stoxx 600) by +52% last year. managers, mutual fund managers, and institutional clients. Structured products espite the challenges The French investment bank remains a Index, and iStoxx Transatlatic ESG 100, BEYOND RETAIL “We also created two other indices- are more than ever a must have in a faced in 2020 SG once leading force in the European structured Euro iStoxx EWC 50 driving significant The bank was also able to leverage one on the US Plan for a Clean diversified portfolio.” again edged on its products landscape and has secured the sales at USS$585.9m/87 products and structuring, trading and first place in several top manufacturer US$402.3m/nine products, respectively. sales capabilities as well categories based on analysis of Das its solid distribution footprint across annualised sales-weighted performance “With more than €15 billion collected the old continent to retain its leading as well as editorial submissions. over the last couple of years, our position in the market in terms of decrement indices and funds still are a issuance and sales. SRP considered publicly offered game changer in the autocall space,” structured products from the bank with said Despagne. “These solutions have “2020 was challenging, and yet, one strike dates between 1 October 2019 and been developed to reduce market of our best year ever in terms of client 30 September 2020 including more than inefficiencies on dividends and volatility. activity. Many new businesses have 55,000 structures – 832 non-flow, 6,864 With standard indices, investors were been created. New products, new leverage and 47,720 flow products. starting to take too much risk to get the Decrement indices and funds still are a client relationships, new significant same returns.” innovations. A very intense, and creative ESG & DECREMENT year overall.” said Frédéric Despagne In the public space, the French bank The bank has developed a wide range game changer in the autocall space (pictured), European head of investment has had a significant focus on ESG and of ESG indices eligible for all types of solutions, equity & fixed income at decrement underlyings with the Euronext pay-offs from autocalls, to warrants, to Société Générale. Euro 50 ESG EW Decrement 50 Points standard capital guaranteed products,

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FEATURE | Q&A FEATURE | Q&A

in client activity over the summer if things really do truly turn Ian Merrill: In the quantitative strategies area or systematic Barclays: commodities are an positive with further opening of economies. ESG is also an indices area, there's been a proliferation of products and area to watch closely, along with crypto products. I think indices, as well as ways to evaluate those indices. You also interesting space to watch cryptocurrency as an asset class will create some efficiencies have more firms calculating the indices. in payments and product lifecycles, but I think as a product and asset class, we are early in the cycle. If you link to an I would say the challenge overall is that we have to ask The UK bank has seen a boost in growth structures as it leverages its multi-asset strategies. index for example, how volatile could that product be and do ourselves if we have too many indices on offer for clients. Are clients understand the risks. we making it difficult for clients to choose one over the other? I would say that is something that we should keep an eye on In 2021, I think the big question is around whether rates are as an industry. rising and is inflation on the horizon, but I think those are beside the fact that there are very few asset classes still to go I think for us in particular, we prefer to take our time and into other than equities that are paying the returns that clients develop indices that we think are either validated by a are seeking. In particular, certain equity-linked notes once partner, whether that's an academic partner or an asset again showed that they can play a role for certain investors in management partner, who’s long had an active strategy with very volatile market conditions. robust performance history that we then turn into a rules- based index.

What are the challenges individual players and the It's still very much industry face at the moment? What about the bank’s footprint in the annuity space?

Ian Merrill: Our challenges lie primarily in responding to Ian Merrill: Barclays is one of the leaders in the annuity space a yield seeking market conditions, while also being nimble with the backdrop and the annuities industry is a very important area, both in the of low rates and a potential spectre of inflation. There remains fixed index annuity space and in the growing registered index the question of how to balance those things, so it's really space. marketplace about being as dynamic as we can and having products that our client need depending market conditions – whether in I think there was a fair amount of concern about insurance extremely volatile conditions like in 2020, or in the first quarter products losing policy buyer interest last year, with insurance of 2018. It is also possible we have more tepid conditions agents and advisors not being able to see clients in person. more in keeping with 2019, for instance. We saw a drop-off in some product demand, but certainly not on the level that most would have anticipated. I think the year RP caught up with Ian Merrill (pictured), the bank’s Ian Merrill: Obviously, no one foresaw the Covid crisis Investors are showing more of a preference for has started off again quite busy in that regard as well, and managing director and global head of equities escalating so quickly. Clients knew that they had to have customised/proprietary underlyings. Have you made registered index annuities are now a focus for many policy structuring, to discuss the bank’s positioning within access and exposure to a very volatile marketplace, but with strides to expand your offering, especially in the past year? buyers and carriers. the US structured products market, activity trends the backdrop of low interest rates to deal with as well. It was over the past year and upcoming market trends as the busiest year I can recall. Swell as perspectives on the rise of customised indices. So far this year, we've seen a pickup in all markets we're active in, including Japan, the rest of Asia, Switzerland, the US and In terms of growth, where do you see it coming from Latin America. The second half of last year I would characterise in terms of your structured products business? Which as slower overall for the Latam wealth client base, but that has products are clients going for specifically? changed materially this year. I think in all regions there was a concern at the end of last year, but the first quarter could see a Ian Merrill: It's still very much a yield seeking marketplace material drop in client flows after the US election and vaccine where you have clients looking for both index and single stock progress. So far flows remain very robust. exposure in autocall or callable format as examples. Some clients prefer longer dated maturities extending across five We prefer to take our time and years, but some prefer shorter dated. I think the piece that we What trends do you see short-term in the market? How do do also see demand for is in growth structures, the multi-asset you expect this to translate in terms of your activity? strategies, like our Trailblazer Sectors 5 index, in note and develop indices that we think are annuity insurance format. However, it really has been still very Ian Merrill: I think a really interesting space to watch is much an income generated story. commodities. We've seen our ETN business get more inbound commodity orders than we have in years. I recall that as an validated by a partner. asset class, commodities have generally been on the sidelines How is the structured products business performing on for a number of years now. I think that's something to watch, the back of last year’s events? but I also think we're just a bit cautious about a slowdown

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FEATURE | Q&A FEATURE | Q&A

hosting webinars – all to introduce these novel tools for understanding our target market. This is an issue that all View from the top: investors want a more investors that are already accustomed to trading different ETP and ETF issuers have because the products trade on active approach to saving, investing types of instruments. exchanges rather than being bought directly from the issuer. We know there’s significant interest in the market for pure It is a challenge to understand from where the demand is beta ETFs with investors parking huge portions of their coming. Based on feedback that we have been getting and Following the expansion of its pool of underlyings and the addition of new leverage investments in buy-and-hold vehicles. That said, there are speaking with counterparties, we see that it is mostly the factors to its flagship Tesla ETP, SRP spoke to UK-based sponsor of physically backed also a lot of people looking to take a more active approach sophisticated investor who understands what these products in trading individual equities. The hype around recent have to offer. They enjoy the hassle-free process of trading exchange-traded products (ETPs) Leverage Shares about the firm’s progress since its development on Reddit and stocks like Gamestop/AMC with conviction. launch in the summer of 2020. proved just that. People value convenience more than ever before. The modern The focus in 2020 was on making sure we have a sound investor does not want to waste an hour to make a brokerage foundation in place and a clear strategy on how to move account, they want it to be done in minutes. They don’t want to forward. We are going to keep listening to what our investors have to buy full shares, sometimes they prefer fractions. They want to trade and bring to market products that will hopefully don’t want the complexities of managing margin accounts, they help them achieve their financial goals. want convenient leverage. Also, more people are becoming more involved in what is called active saving. You use one Is the Leverage Share range of products resonating with platform where you hold your savings, but you can also trade investors? and invest through that same platform. Increased popularity of growing companies like Revolut, which is big in Europe, and a Oktay Kavrak: We are getting a lot of feedback from investors lot of neobanks prove just that. There’s significant in our products - a lot of them are with these legacy brokers in Europe where you pay higher fees and are still limited in terms What opportunities are you looking for? interest in the of what you can trade. Often you can’t get access to margin or really trade more sophisticated products. Oktay Kavrak: 2021 is a big year for us. Apart from expanding our single stock range, we are looking into other asset classes market for pure The truth of the matter is that a lot of people are comfortable as well. We started out with single stocks to bring something with more risk. They appreciate products that are as powerful refreshingly new to the market and showcase what we can as those they have traded in the past yet probably simpler to do. Over time we will look at more complicated strategies. beta ETFs understand. This is where we are bringing value. Everybody We have one in the pipeline in discussion which is something values simplicity and convenience, and our products bring not yet seen on a regulated exchange. The end goal for cohesion to a fragmented structured products market. us remains the same - to become the leading provider of alternative investment vehicles in Europe. How has the product range grown over the last few months? Are there any trends where Leverage Shares can capitalise everage Shares reported a turnover of £42.3m Leverage Shares added last week new stocks to its pool of on to grow its market share? and £35.2m across all ETPs for January and underlyings with fintech shares such as Square and PayPal, Oktay Kavrak: We initially started out with 12 products and February, respectively. The most popular ETP, in UK blue chips that include Barclays and BP, and additional grew that to 40 in 2020. By the end of Q1, we expect that Oktay Kavrak: You see what is happening with Ark Invest in terms of turnover, were the 2X Tesla ETP (£12.1m leverage factors to its flagship Tesla ETPs. number up to around 70 and be pushing for almost 100 by end the US. Everything they put out is crucial information for the in Jan 2020), 3X NVIDIA ETP (£6.2m in Jan. 2020) of Q2-Q3. Making ETPs on individual stocks comes with its fair individual investor and people are increasingly interested in Lwhile the best performers of 2020 were the 2X Tesla ETP Leverage Shares launched its range of leveraged ETPs as share of challenges. the disruptive companies of tomorrow. One thing they’ve done (2240%), listed in April 2020 and the 3X Apple ETP (246%) the market was bouncing back from the initial panic sell-off well is send a message that really resonates with the modern listed in June 2020. seen in March and April. How was the run up to the initial Not only do you have to pick a stock that is popular now, but investor. People want to be part of the shift to the disruptive launch? also ones that won’t fade after a short period of hype. We tech of tomorrow that seemed all but impossible just a few Oktay Kavrak (pictured), CFA, institutional sales, notes that have all the FANMAGs covered, but the reality is that if the years ago. Following that same mentality, wherever investor despite the bull run of the Tesla stock, the GBP monthly Oktay Kavrak: 2020 was particularly interesting for us underlying stock does not move, the leveraged or inverse ETP sentiment goes, that’s where we go. turnover of the inverse version, the -1x Tesla ETP, increased by because we moved into a new phase of our development. probably won’t get much traction. Netflix is a good example of 2800% since August 2020, which suggests there are still many Leverage Shares had been existing for a few years, but we had one that prospered initially following the market meltdown, but Some trends that we’ll see play out this year is the maturing of people with significant bearish sentiment on the stock. been lagging on a few fronts, particularly in making the market sort of teetered without direction ever since. On the flipside, new industries: EVs, digital wallets, cannabis etc. As we saw aware of our products and educating investors on the ins and we continue to see a lot interest in our Tesla, Apple, Amazon, with Tesla and Bitcoin, investors have a tendency to legitimise In terms of AUM, the firm’s ETP range is around the US$50m out of single stock ETPs. and NVIDIA ETPs. trends/investments once the bigger institutions get involved. mark but the goal is “to be far above US$100m+ by year end - The interesting part is that this time around, the individual especially with the release of the new products”. The first half of 2020 for us was dedicated to getting in How would you rate the performance of Leverage Shares investors are spotting these sleeping giants before the bigger contact with people in the media, with brokers, and making since its launch? players – and this is a radical shift. “In terms of trading volume, it has increased sevenfold since the business case for our products. A lot of time was spent our listing of the additional 28 ETPs in June 2020,” said Kavrak. on education, on collateral like presentations, doing pitches, Oktay Kavrak: Our main achievement internally was Thematic investing is bigger than ever.

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EXPERT VIEW EXPERT VIEW

different underlyings (and combinations of them) as well as Other uses of ETFs include defined risk strategies which more complex product payoffs. Many different variations combine an underlying with a call and put strategy to The role of derivatives in the evolution of started to become popular as institutional business picked up. generate yield and reduce risk. These seek to combine the Different investment ideas were then explored - the concept efficiency of the ETF and their options to provide lower risk of options added to initial capital to provide investments with investment solutions and have been successfully developed structured products equity upside or providing yield generation by selling covered by exchanges such as the CBOE. calls on top of a portfolio. This naturally expanded into the structured product markets that we recognise today. Meanwhile, development in quantitative indices continues Derivatives and structured products are very closely related and have overlapping as banks and other index sponsors seek to test and market uses and purposes within the world of financial instruments.By Tim Mortimer – FVC. Structured products markets are now a significant investment new strategies including volatility control, asset switching, and class in their own right and while they grew out of the first dividend plays. use of derivatives, they now depend on them to make them function. Such indices can either be launched by index providers working with investment banks or used to create an ETF. Investment banks are the main manufacturers of such products Often these more sophisticated indices use various risk Image: Daniele Levis Pelusi/Unsplash. and will use various risk management techniques to run their management techniques such as options to define their businesses prudently. The most common strategy is that even characteristics which are typically to seek performance at for more complex structured products the issuing bank will use lower volatility. Such indices are generally then developed as simpler derivatives to risk manage the resulting exposure. This delta one investments to allow exposure and liquidity in an includes trading baskets and futures to hedge the underlying open-ended fashion. asset itself for the delta risk. In addition, buying or selling options to manage volatility and hedging dividend exposure In the fixed income market structured products that link to through futures is very common. Constant Maturity Swaps (CMS) have been popular in many market conditions and in the world of commodities it is While index linked structured products remain popular, the routinely necessary to use futures to obtain exposure in an explosive growth of the ETF market means that in some cases efficient manner. ETFs that track a certain index can be more useful than the index itself and as a result the ETF finds itself as the underlying The use of derivatives in structured products and all the asset for a structured product. related and competing disciplines goes to make up a rich marketplace of risk-controlled investment solutions. Innovation The EEM iShares ETF which tracks the MSCI Emerging Markets is happening all the time as product providers seek to provide index is a good example and has many billions of dollars under new answers to age old problems such as protecting capital management. In turn, because the ETF is such a convenient, and providing yield in low rate environments. cheap and liquid way to access exposure (particularly in less liquid or more expensive cases such as emerging markets) Disclaimer: the views, information or opinions expressed options also have become liquid driven by demand and the herein are those of FVC, and do not necessarily reflect the existence of the ETF to facilitate hedging. views of SRP.

Derivatives markets have been around for many decades, However while an exchange is a great basis for a market such beginning with exchange-traded call and put options in as derivatives to grow it tends to be limited in scope because equities, and then onto fixed income swaps and beyond. This the emphasis is to make sure that the instruments it carries are development came out of traders wanting to either hedge liquid and traded enough. This principle remains true despite Development in quantitative indices away risk or to gain and leverage exposure. advances in technology in the last twenty years. In finance it is the coming together of agents with different Demand for instruments that went beyond what exchanges continues as banks and other index sponsors views and objectives that makes for a liquid and active market. could offer rapidly increased. This has been addressed by the Because equity options are traded directly, they only need over-the-counter (OTC) markets from the 1990s onwards, and enough liquidity and the presence of market makers to make the idea of an informal but active broker driven interbank and seek to test and market new strategies them viable. Options then quickly provided a popular and bank to asset manager market. reliable way for traders and investors to gain access to risk management and targeted exposure. This development allowed for options with longer maturities,

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EXPERT VIEW EXPERT VIEW Product analysis: Downside accrual Downside accrual barrier v standard European barrier barrier with a twist 12 10 Structured product plan manager Idad have started 2021 by bringing an innovative variation on the standard kickout product to the UK market. By Tim Mortimer - FVC 8 6

six months, or approximately 126 trading days, then 12.6% of 4 Image: chart chris-liverani—unsplash capital would be lost. 2 The barrier level of 65% is typical of a European barrier level currently seen in the UK although it is higher than has been 0 seen historically due to the relatively unfavorable pricing conditions. It is these same conditions that have driven the <-15 -15 to -12.5 -12.5 to -10 -10 to -7.5 -7.5 to -5 -5 to -2.5 -2.5 to 0 0 to 2.5 need for this new payoff. Persistent low interest rates and reduced dividend levels make it hard to generate attractive Accrual put with European barrier Standard European barrier headline rates for popular structures like autocall and phoenix autocall products. Investors are used to seeing returns Source: FVC Structured Edge offered at a certain level and when pricing parameters move against structuring these products it is difficult to market the same products with lower returns because there will not be sufficient demand. Generally, this is when we see products moving somewhat up the risk scale in order to keep the level mechanism which makes pricing more favorable and therefore chance of loss is the same it should come as no surprise that of returns consistent. The key is to do this in a managed and a higher return can be achieved. the magnitude of losses is expected to be higher. However, the transparent way. 10 year back-testing results for both downside variations show The product here has avoided both of these variations and no cases where the investor had lost capital showing that this Once it has been decided that more risk should be introduced been developed as another way to generate higher returns strategy has performed well historically. in order to offer higher returns providers have a few options whilst keeping much of the same product structure. to consider. A common choice is the introduction of one or The rationale for offering this kind of structure is that although more additional underlying assets on a “worst-of” basis which The graph shows the simulated probabilities of the Idad this product would perform poorly in a bear market it would will increase the probability of capital loss. It also introduces downside accrual barrier and an otherwise identical product only perform worse than a standard European barrier if complexity and correlation risk into the product. Another with a standard European barrier of 65%. the bear market remained for a sustained period which is This product is issued by Société Générale and the concept mechanism available to providers is to swap out the popular historically has not been seen very often. was created and developed by the bank who are well known FTSE 100 index with a different underlying. The current Firstly, this shows that the probability of not breaching the for their innovation capabilities and track record. trend is to keep a UK focus but use an asset with a dividend barrier is the same as would be expected. In both cases Comparing this product with a standard barrier product it the final level of the index needs to be below 65% for the would only perform worse than if the index was below the 65% The upside generating element of the FTSE 100 Kick Out downside to knock in. The total probability of loss is also barrier (4,310 index points at todays level of the FTSE 100) for Plan - Issue 1 follows a familiar autocall structure and has the same in both cases, 10.15%. The difference between the at least 1.6 years out of the 5 year product term. Any less than a typical schedule of payments which will be paid if the outcomes of the two barriers can be seen in the more granular this then the product would outperform the standard structure. underlying, (the FTSE 100 Index) is above its initial level on breakdown where it becomes clear that the new accrual If the index recovered to over 65% at maturity, then both types any observation date. barrier has higher chances of larger losses. would pay full capital.

The twist in the product relates to the downside risk and the According to the same simulation results the accrual barrier This product is a good example of how structured products are calculation of the amount of capital returned in the case of a The new accrual barrier has a 1.24% chance of returning zero capital at maturity. This able to adapt to market conditions and develop features that barrier breach. If the index is below 65% of its initial level at would happen if the index was below the required level for align with investors risk appetite. The product has the same maturity, the investor will lose some of their capital investment. four years out of the five-year product term and finished trigger level for capital loss as many FTSE linked products The amount of capital lost will depend on the number of days has higher chances of below 65% of its initial level. For a typical European barrier, the available on the market, so the investor has to determine during the product term that the index has been below this probability of a zero return is negligible as it would require the whether the potential for greater losses if this occurs are worth barrier level. For each trading day that the closing level of larger losses. index itself to fall to zero. the additional upside potential. the index is below the barrier, 0.1% of capital will be lost. If for example the barrier was breached at maturity and during the This accrual feature has been developed as a way of Disclaimer: the views, information or opinions expressed herein product term the index had been below the trigger level for generating higher returns by introducing more risk. Since the are those of FVC, and do not necessarily reflect the views of SRP.

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PRODUCT WRAP PRODUCT WRAP

Opportunity – an actively managed fund that typically invests issuer is Morgan Stanley BV. James Brearley acts as the plan J.P. Morgan tracks new in companies it believes have sustainable competitive administrator and custodian. Priips SRI: four out of seven. Product wrap: advantages that can be monetized through growth. At maturity, if the strategy performance is positive, the product momentum index in the US offers 100% of the rise in the strategy. Otherwise the product NORTH AMERICA expires worthless. The product is issued via Deutsche Bank In this week’s wrap, we look at a selection of structured products with strike dates and listed at the Nordic Derivatives Exchange. It is issued at 17.5% (SEK17 500) and a commission fee of three percent is J.P. Morgan Chase issued Return Notes on the J.P. Morgan between 21 March and 17 April 2021. added to the issue price. Priips SRI: seven out of seven. Kronos+ Index in the US. The index attempts to provide a dynamic rules-based exposure to the S&P 500, which is In Finland, SIP Nordic Fondkommission teamed up with determined on strategies that reference the following historical rate of 8.5%/12 for each month that has elapsed. There is a BNP Paribas for the launch of Huippujohtajat Autocall II. The tendencies: historical outperformance around the turn of the EUROPE total fee of 4.20% built into the terms of the bond of which certificate has a maturity of maximum six-years and offers a month; historical price momentum ahead of monthly index the European Depositary Bank will receive 0.3% for custody return based on the performance of the Solactive Eurozone options’ expiry; and historical mean reversion into month-end. and execution services. Priips summary risk indicator (SRI): TOP CEO 2020 AR 5% Index, which replicates an investment The three-year registered note offers a capital return based BNP Paribas Fortis collected €3.8m with the Eurozone four out of seven. into the index components (net dividends reinvested) with on the positive or negative performance of the index over the Exporters Note 2031/2 in Belgium. The 10-year, capital a constant dividend markdown of five percent per year, investment period, multiplied by an adjustment factor of 101.5%. protected product participates 100% in the rise of the Intesa Sanpaolo achieved sales of €51.2m with its US subtracted on an accrued basis. Expenses included in the The estimated value of the notes are approximately US$939.30 Solactive Eurozone Exporters Efficient-index, subject to dollar denominated Standard Long Barrier Protected Digital issue price add up to 8.66% of the notional amount per per US$1,000 principal amount. 24-months backend averaging. BNP Paribas Fortis Funding is Certificates on the S&P 500 in Italy. If, during any annual digital certificate. The product is listed on the Nordic Derivatives the issuer. A one-off structuring cost of 1.49% is included in the valuation period, the average index performance is at or Exchange and issued via BNP Paribas Issuance BV. Priips SRI: Also in the US, HSBC sold US$613,000 worth of Barrier issue price of 100%. Returns are subject to a 30% withholding above its initial level, a coupon of 2.31% is paid. The minimum five out of seven. Enhanced Participation Notes on a basket of two exchange- tax. Priips summary risk indicator (SRI): two out of seven. capital return at maturity is 95%. The offer price includes traded funds: Technology Select Sector SPDR ETF and distribution commissions equal to three percent; costs for the Mariana’s FTSE CSDI Defensive Income Kick Out Plan is iShares MSCI Emerging Markets ETF. The product has a BCP Asset Management collaborated with Goldman Sachs maintenance of the conditions equal to 1.389%; and other a public offer in the United Kingdom. The product, which five-year maturity and offers 198% uncapped exposure to for the launch of issue two of its Global Artificial Intelligence structuring costs equal to 0.245%. The product is listed in has a 10-year tenor and is based on the performance of the any positive return of the least performing fund. The product (AI) Daily Kick-out Bond in Ireland. The 10-year product is Luxembourg. Priips SRI: three out of seven. FTSE Custom 100 Synthetic 3.5% Fixed Dividend Index, is has a soft capital protection barrier of 80%. HSBC may pay linked to the iStoxx AI Global Artificial Intelligence 100 NR constructed to offer a potential coupon of 1.125% per quarter varying underwriting discounts of up to 0.75% per US$1,000 Decrement 5% Index. There is a monthly early-redemption Strukturinvest is distributing 2398 Marknadswarrant providing the closing price of the index is at or above 65% principal amount in connection with the distribution to other feature (starting from the end of the first year onwards) that Global in Sweden. The five-year warrant is linked to the of the start level on a quarterly observation date. It is listed registered broker-dealers. The estimated initial value on the will be triggered if the index closes at or above its initial level Deutsche Bank Global Opportunity 17% Index, a strategy that in Luxembourg and available as a direct investment; Isa; pricing date is US$968.30 per security, which is less than the on the valuation date. The potential return will accrue at a in turn provides exposure to Morgan Stanley INVF Global pension; and for companies, trusts and charities. The product price to public.

Europe: top 10 issuer group by issuance - 21 March to 17 April 2021* Americas: top 10 issuer group by issuance - 21 March to 17 April 2021*

Raieisen Switzerland J.P. Morgan

Leonteq UBS

BNP Paribas BMO Financial

Goldman Sachs Citi

Société Générale Goldman Sachs Danske Bank Morgan Stanley

Investec Barclays

Julius Baer Credit Suisse

Citi RBC

Barclays HSBC

0 10 20 30 40 50 60 70 80 90 0 50 100 150 200 250 300

*Excluding flow- and leverage products Source: StructuredRetailProducts.com *Excluding flow- and leverage products Source: StructuredRetailProducts.com

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PRODUCT WRAP PEOPLE MOVES Asia Pacific: top 10 issuer group by issuance - 21 March to 17 April 2021* People Moves HSBC

KB Financial Group

Samsung Securities

Mirae Asset

Shinhan Financial Group

Korea Investment

Hana Financial Group

Meritz Securities

Shinyoung Securities

Bank of China

0 100 200 300 400 500 600

*Excluding flow- and leverage products Source: StructuredRetailProducts.com

KB Investment & Securities is targeting KB able ELS 1703 at LATIN AMERICA retail investors in South Korea. The three-year product is tied to a basket composed of three indices: Kospi 200, S&P 500 ESG, and Eurostoxx 50 ESG. Every six months the product has the potential Goldman global strats head departs BTG Pactual is marketing COE viés de Alta in Brazil. The five- to autocall. However, if it continues until maturity, it offers 100% of year deposit participates 100% in the positive performance of capital return plus a fixed payout of 116.5% if the level of the worst the KraneShares CSI China Internet ETF subject to an overall performing index is at or above 70% of its initial level. Stacy Selig, co-head of global structuring Prior to that, she was head of the equity structuring group for maximum capital return of 190%. The underlying fund tracks and sales strats and head of Americas the Americas and head of global synthetic products structuring Chinese internet companies that provide similar services as Bank of East Asia launched ELI IXP-00061049 in Hong Kong structured sales at Goldman Sachs is set and co-head of global origination, with a focus on equities Google, Facebook, Twitter, eBay, Amazon, etc. SAR. The two-month deposit pays a coupon of eight percent to leave the investment bank. products. Selig joined Goldman in 2004 after an early career per annum if the shares of Mengniu Dairy and Anta Sports as a tax attorney. She began in the tax planning and advisory Products close above 96.2% of their respective strike levels According to a memo seen by SRP, group before becoming part of the macro equity desk, head of on the monthly valuation date. At maturity, if both shares close Ashok Varadhan and Marc Nachmann, the equity structuring group for the Americas and global head ASIA PACIFIC above 88% of their initial level, the product returns full capital. global co-heads of the global markets of synthetic products structuring and co-head of securitized division, announced Selig’s departure product structuring. after nearly 17 years at the bank. Mitsubishi UFJ Morgan Stanley Securities collected Selig is also a member of the bank’s sustainable finance JPY9.58 billion (US$87.1m) with KI M20260310 in Japan. The MIDDLE EAST & AFRICA Selig was appointed to her current role in early 2019 after steering group and is co-chair of the global markets division product offers a fixed coupon of 3.4% pa for the first quarter. Goldman reshuffled its systematic trading strategies team sustainable solutions council. In her role as co-chair of the Every quarter thereafter, a coupon of seven percent pa is which saw the former co-head of global sales systematic council, she played a key role in driving coordination across paid providing the Nikkei 225 and S&P 500 both close at or SIP Nordic is distributing a five-year split deposit linked to trading strategies (Strats) Stefan Bollinger, shifting to the bank’s global product offerings. above 105% of their initial levels on the valuation date. If both the Solactive Sustainable Development Goals World RC 8 private wealth franchise. indices close above 80% and below 105% of their initial levels, EUR Index in South Africa. Fifty percent of the investment is She joined Goldman Sachs as a vice president in 2004, and a coupon of 3.4% pa is paid. Otherwise, the coupon is set at placed in an income account that pays a fixed return of 12% Since then she was responsible for the bank’s Strategies was named managing director in 2010 and partner in 2016. Her 0.1% pa. The 4.95-year structure is issued via Morgan Stanley after one year. The remaining 50% participates 75% in the (strats) unit globally across equities and FICC alongside Thalia departure follows that of Tom Leake, head of equity structuring and also available via third party distributors 105 Securities positive performance of the index. The product is listed in Chryssikou, co-head of global sales strats and structuring for Emea, in London, who left the US bank to join Capstone and 77 Bank. Bank of New York Mellon acts as the derivatives Johannesburg and issued via BNP Paribas Issuance BV. BNP across fixed income currencies and commodities (FICC). Investment Advisors as head of solutions. counterparty. Paribas is the guarantor.

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PEOPLE MOVES PEOPLE MOVES

retail distribution channels including Absa Wealth, Absa Private Prior to joining BofA, Treuer spent 14 years at Barclays Numerix Bank, third-party broker networks and investment platforms. investment bank as a managing director. Barclays’ equities Galaxy Digital FY 2020 revenues were up 31% (up 32% in USD) v 2019, Sydow joined Absa Capital from Barclays in 2012, having spent outperforming nearly all of its US and EU peers and beating Risk technology provider Numerix has six years in the UK investor solution team as vice president the US bank average by six percent. Galaxy Digital Holdings has appointed Mark Toomey as its announced the promotions of Diane of investor solutions. Prior to this, Sydow was an associate head of institutional sales, effective 29 March. Redvanly, Bill Humphrey and Pulak director at Barclays Wealth, where he was involved in the Rishi (pictured) to new roles within the management and rollout of the firm's onshore and offshore Toomey joins the US investment management firm after spending company. Redvanly, CFO since 2018, has funds proposition. He also spent part of his career with Ethias over two decades in traditional capital markets at Goldman Sachs been elevated to executive vice president, Alexander Forbes and Standard Bank in South Africa. and J.P. Morgan Chase, where he managed equity derivatives CFO of Numerix. In her role, she oversees sales teams that covered a range of asset management clients for Numerix’s finance, accounting, reporting Alain Flas (pictured) has started a new a variety of derivative and structured products. and investor relations functions globally, job as investment manager responsible and is also responsible for budgeting and forecasting financial Barclays investments & fund selection at Ethias. In his new role, he will report to Damien Vanderwilt, co- projections. Having joined Numerix in 2014, Redvanly has will Flas, a structured products veteran, president and head of global markets at Galaxy Digital. focus on enhancing financial analysis for strategic decision joined the Belgian insurer after an Toomey joins Galaxy Digital at a time when the firm is building making and work with the executive leadership team to align Christian Treuer has joined Barclays as extended career break. Prior to Ethias, a suite of institutional-grade products and services to respond these initiatives with the future direction of the company. co-head of Emea derivative distribution his most recent role had been that of to the incoming wave of institutional demand for exposure to - global equities group. Treuer rejoined chief executive officer at Finvex, digital assets and cryptocurrencies. Humphrey has been promoted to chief technology officer Barclays in January as a managing a position he held until September of Numerix. In his previous role, Humphrey worked as chief director and co-head of equity derivatives 2018. At Finvex, Flas oversaw the launch of the Finvex ‘He will be a key contributor in expanding our institutional client software architect and head of the platform group within the sales, to work alongside Andreas Quality Efficient Asia Index, which was reported by SRP. base, building out our coverage team, and continuing to educate development organisation. With the company since 2003, Konomis, co-head of equity derivatives The Brussels based index provider filed for bankruptcy in the institutional community about the cryptocurrency asset class Humphrey has worked on several initiatives including Numerix’s sales Emea, SRP has confirmed. November 2020. and its role within a diversified portfolio,’ said Vanderwilt. enterprise distribution analytics server, the Numerix XVA enterprise application, and the structured notes platform Numerix Both Treuer and Konomis report to Makram Fares, head of Flas was chairman of the board and founding member of the Oneview. In his new role, Humphrey will be focused on future equities distribution, Emea. They will work closely with the Belgian Structured Investment Products Association (Belsipa) development goals including the evolution Numerix’s cloud- structuring and trading teams and will be responsible for between January 2013 and February 2017. Flas joined Finvex DelphX Capital Markets native solutions and building out the company’s SaaS and RaaS diversifying bank’s business mix, ‘providing bespoke solutions from ING Bank, where he was head of sales for products for offerings. He will also be working to incorporate industry-focused to institutional and wealth clients whilst accelerating the private investors & equity derivatives and before that global tools such as Python scripting and APIs into Numerix’s offerings. automation of our structured products flow with indirect retail’. head of equity derivatives sales. Prior to ING he worked in DelphX Capital Markets has appointed industry veteran Keith equity derivatives sales at Dexia and also as an equity trader at Styrcula to its recently-formed strategic advisory committee Rishi has been promoted to chief software architect of Treuer joins from Bank of America (BofA) where he was a CBC Banque & Assurance. as part of its plan to assemble a team of fixed income and Numerix. In his previous role as senior vice president, managing director and head of equity derivatives sales and structured product experts to spearhead the launch of the product development, Rishi worked on multiple projects in head of Emea equity derivative and continental European DelphX covered put options (CPOs) and covered reference the areas of areas of trading, wealth management and risk equity distribution since 2018. notes (CRNs) facility to offer collateralised default protection for management, as well as on Numerix’s Oneview product suite. Linklaters credit securities. In his new role Rishi will oversee the design and architecture He joined BofA as head of Emea equities clients solutions of Numerix’s various modules, as well as the transition distribution alongside Martin Gupta, head of Emea equity The new offering is targeted at insurance, financial, pension towards a cloud native product offering. structuring and financing origination and structuring, and Linklaters has appointed Hwang Hwa and family office end-users as an alternative to the OTC was a driving force behind the rebuilt of BofA’s Emea equity Sim (pictured) as global practice head - swap market. Styrcula is the founder and chairman of the derivatives team over the summer of 2018, following a number capital markets for a four-year term. He US Structured Products Association. Prior to launching the of senior departures. will succeed Michael Voisin whose tenure association in 2008, he was at J.P. Morgan where he was head Rand Merchant Bank in the role ends on 30 April this year. of the structured solutions group in the equities division. At Treurer assumed the additional role of head of EU equities sales J.P. Morgan, Styrcula was also a driving force in the team that in late September 2019, reporting to Sanaz Zaimi (pictured), head Hong Kong SAR-based Hwang Hwa was developed the CBOE S&P 500 PutWrite Index in 2006. Ryan Sydow has joined Rand Merchant of the European Union broker-dealer unit BofASE and Julien promoted as a capital markets partner Bank (RMB) as head of retail, RMB Invest Bahurel, head of Europe, Middle East and Africa (Emea) equities. with Linklaters in 2010. He advises Styrcula has a two-decade track record in the structured at Rand Merchant Bank. issuers, underwriters and investors on debt, equity and equity- products industry, and has worked in senior marketing and Treuer played an important role alongside the US bank’s head linked products in China and Asia. structuring positions at Credit Suisse, J.P. Morgan, UBS and Sydow (pictured) has been head of retail of Emea equities client solutions trading, Arnaud Lannic, in the Scotia Bank, where he worked with Raymond James on the distribution at Absa Capital, the investment establishment of BofA’s broker dealer unit in Paris. Hwang Hwa is an expert in convertible bonds and development of the RJ Analysts' Current Favorites index-linked banking arm of Absa Bank Limited, in exchangeable bonds, cross-border bond issuances by major notes. At UBS Warburg, he launched the first structured note South Africa, for the last eight years. Treuer’s departure from BofA comes after the bank’s Emea PRC companies (including structured bonds), panda bonds, linked to the Dow Jones Industrial Index. equities and equity derivatives rebuilt throughout 2019 after green bonds and structured pre-IPO investments. He also He was responsible for the bank’s product proposition a year focused on fuelling the turnaround of the business worked on a number of proprietary investments by alternative and distribution footprint for structured products including following a challenging 2018 which resulted in a pullback in capital providers, global investment banks, special situations exchange-traded funds and exchange-traded notes (ETN) into investing banking activities in Europe. groups, hedge funds and private equity funds.

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