2015 ISSUE: NOVEMBER Structured Products in Asia hubbis.com 1st Leonteq has received more than 20 awards since its foundation in 2007 THE QUINTESSENCE OF OUR MISSION STATEMENT LET´S REDEFINE YOUR INVESTMENT EXPERIENCE Leonteq’s explicit goal is to make a difference through particular transparency in structured investment products and to be the preferred technology and service partner for investment solutions. We count on experienced industry experts with a focus on achieving client’s goals and a fi rst class IT infrastructure, setting new stand- ards in stability and fl exibility. OUR DIFFERENTIATION Modern platform • Integrated IT platform built from ground up with a focus on automation of key processes in the value chain • Platform functionality to address increased customer demand for transparency, service, liquidity, security and sustainability Vertical integration • Control of the entire value chain as a basis for proactive service tailored to specifi c needs of clients • Automation of key processes mitigating operational risks Competitive cost per issued product • Modern platform resulting in a competitive cost per issued product allowing for small ticket sizes LEGAL DISCLAIMER Leonteq Securities (Hong Kong) Limited (CE no.AVV960) (“Leonteq Hong Kong”) is responsible for the distribution of this publication in Hong Kong. It is licensed and regulated by the Hong Kong Securities and Futures Commission for Types 1 and 4 regulated activities. The services and products it provides are available only to “profes- sional investors” as defi ned in the Securities and Futures Ordinance (Cap. 571) of Hong Kong. This document is being communicated to you solely for the purposes of providing information regarding the products and services that the Leonteq group currently offers, subject to applicable laws and regulations. Any – including only partial – reproduction of this publication, or any article or picture is solely permitted based on an authorization from Leonteq Hong Kong. No responsibility is assumed in case of unsolicited delivery. © Leonteq Securities (Hong Kong) Limited 2015. All rights reserved. LEONTEQ SECURITIES (HONG KONG) LTD. Suit 3508 – 3509 35th Floor | Two International Finance Centre | No. 8 Finance Street | Hong Kong Phone +852 3972 5500 | Fax +852 3972 5599 | www.leonteq.com Foreword This is the inaugural edition of our publication focused on the role and application of structured products within wealth management. The priority is to educate front-line Even as a starting point, wealth manag- wealth management staff as part of the ers need to know which range of prod- broader discussion about how to evolve ucts makes most sense for them to try the structured products space in Asia. to sell – based on which of them are most likely to attract sufficient volume With volatile and uncertain markets from their specific client base, and likely to continue, practitioners need to therefore are most scalable, rather than understand which products can be sold focusing on one-off or unnecessarily in decent volume, and then how to have complex structures to satisfy just one effective conversations with their or two clients. clients about the role of different prod- ucts and where they fit in portfolios. Product manufacturers need to pay at- tention to what’s important to the buy- One of the important areas of focus for side: the quality and consistency of their product providers and distributors service; the consistency of their pricing; today is getting clients to use a broader the level of cooperation they are willing range of products which are more suit- to provide when products don’t perform able and relevant to them. Too many as expected; and the ability to provide clients tend to use the wrong product market colour and investment ideas, as at the wrong time, and have expecta- well as a wide range of underlying pay- tions for specific products in certain offs and maturities. market environments which are not necessarily correct. Yet a lot of the time, On the one hand, this publication covers these clients could use a much simpler the business of structured products for structure to more efficiently achieve gatekeepers on the buy-side. In addi- the aim they have in the first place – and tion, with client adviser increasingly at the same time ensure better returns aware of the need to better understand at lower levels of risk. the products they are selling, the rest of the content aims to achieve this. Advisers therefore need to know how to assess whether clients should lock I hope you enjoy reading these insights in profits and, if so, when and how. and derive value from them. ANDREW CROOKE EDITORIAL AND CONTENT DIRECTOR HUBBIS CONTENTS Feature Articles 02 DRIVING DIVERSIFICATION AND SCALABILITY IN STRUCTURED PRODUCTS As Asian investors have increased their level of engagement with structured products in 2015, their focus on diversification via some different strategies is healthy for the market. 16 ENGINEERING INVESTMENTS TO ADD MORE VALUE The flexibility of structured products means they can offer investors a variety of investment options that vanilla financial instruments cannot, and dovetail closer to the investment expectations of buyers. 22 A COLLABORATIVE APPROACH TO RAISE THE BAR More practical tools and information needs to go into the process of educating relationship managers and clients about how and where structured products fit into their portfolios. 32 CREATING A BIGGER ROLE FOR STRUCTURED PRODUCTS IN PORTFOLIOS Redefining structured products as investment solutions and highlighting the benefits of them for risk control will create a difference in making them more widely used in portfolios. 38 HOW FINTECH PLATFORMS WILL EVOLVE THE INVESTMENT INDUSTRY The increasing use of financial technology platforms that can enhance the transparency, pricing efficiency and order execution process for structured products trades is expected to pave the way for greater investment in these instruments. i STRUCTURED PRODUCTS IN ASIA 2015 1888240-001 EDG ad (A4).ai 1 9/2/2015 1:05:15 PM Solutions built on a strong foundation J.P. Morgan is one of the most established providers of structured products to the Asian region. Working closely with financial intermediaries and local distribution networks, J.P. Morgan meets the needs of a wide variety of investors in the fast growing markets of Hong Kong, Singapore, China, South Korea, Taiwan, Malaysia, and Thailand. For more information, contact us: [email protected] or (852) 2800-7888 jpmorgan.com J.P. Morgan is a marketing name for investment banking businesses of JPMorgan Chase & Co. and its subsidiaries worldwide. Securities, syndicated loan arranging, financial advisory and other investment banking activities are performed by a combination of J.P. Morgan Securities Inc., J.P. Morgan Securities plc and the appropriately licensed subsidiaries of JPMorgan Chase & Co. in EMEA and Asia-Pacific, and lending, derivatives and other commercial banking activities are performed by JPMorgan Chase Bank, N.A. CONTENTS Expert Insights BNP PARIBAS 08 COMPARING STRUCTURED PRODUCTS IN EUROPE AND ASIA OUR COMMITMENT David Schmid of Leonteq Securities YOUR BUSINESS GROWTH 14 THE DO’S AND DON’TS OF STRUCTURED PRODUCT ISSUANCE Richard Wu of Leonteq Securities 19 THE VALUE OF INVESTING IN BASIC STRUCTURED PRODUCTS Peter Williams of Leonteq Securities 26 INCOME THROUGH STRUCTURED SOLUTIONS Steve Tang of Leonteq Securities 28 INNOVATION AND TRENDS IN FX PRODUCTS IN ASIA PACIFIC Ken Tan of BNP Paribas A workforce of over 9,500 people Dynamic presence in 14 markets 30 INNOVATION AND TRENDS IN COMMODITIES More than 150 years of expertise Ker Lih Gan of J.P. Morgan Connected by extensive network 36 HOW RMS CAN USE TECHNOLOGY TO IMPROVE THEIR VALUE to Europe, Middle-East Africa, PROPOSITION the USA and Latin America Mahesh Bulchandani of FinIQ 42 LAND TO GIVE BUYERS AND SELLERS SPACE TO EXPAND PRODUCTS Erdem Ozgul of Numerix 46 ADVICE ON ADVANCED STRUCTURES Duane Bong of Leonteq Securities 49 Directory PEOPLE AND FIRMS WHO SUPPORTED THIS PUBLICATION We very much appreciate the participation and contribution of key individuals and firms in the structured products community. Published by Hubbis. Printed in November 2015 in Hong Kong. © Hubbis (HK) Limited 2015 All rights reserved. No portion of this book may Michael Stanhope be reproduced, duplicated or copied by any Chief Executive Officer means without the prior written consent of the Hubbis publisher. No legal responsibility can be accepted T (852) 2563 8766 by the author or publisher for the content which E [email protected] appears in this publication. W www.hubbis.com bnpparibas.com.hk ii STRUCTURED PRODUCTS IN ASIA 2015 BNP PARIBAS OUR COMMITMENT YOUR BUSINESS GROWTH IN ASIA PACIFIC A workforce of over 9,500 people Dynamic presence in 14 markets More than 150 years of expertise Connected by extensive network to Europe, Middle-East Africa, the USA and Latin America bnpparibas.com.hk 4% to 5% 83% 400 Structured products account Investors tend to place the most The number of pay-offs based for only 4% to 5% of overall value in investment returns when on the four basic elements of wealth investments in Asia looking at structured products, structured products: capital Page 8 according to audience sentiment at protection, yield enhancement, a Hubbis event in Singapore participation, and leverage Page 17 Page 19 30,000 USD1 bn 10% It is estimated there were about Leonteq and Numerix have spent If a product had a 10% delta 30,000 structured products with almost USD1 billion over seven and you put USD1 down, a volume of over USD300 billion years to create the if it ended up in the money in Asia Pacific in 2014 technology behind LAND it would be worth USD10 Page 26 Page 43 Page 47 Hubbis content colour coding REGULATION & COMPLIANCE SKILLS INVESTMENTS STRATEGY & BUSINESS FAMILY WEALTH TECHNOLOGY iii STRUCTURED PRODUCTS IN ASIA 2015 Illuminiating the market The most innovative network for equity linked structured products.