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SRPInsight Issue 13 | March/April 2022 @SRP_Insider
FULL
CIRCLE
FEATURE // EUROPE 2021 FEATURE // PRIIPS ANALYSIS // MARKET
p24 p30 CORRECTIONS P44
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SRPInsight
CONTENTS
Contents
Editorial:
Amelie Labbé, Pablo Conde,
Lavanya Nair, Summer Wang,
Marc Wolterink
Production:
Paul Pancham
News Europe 4
Marketing:
Daniel Evans
News Americas 10
Sales:
Reihaneh Fakhari
News Apac 18
If you are interested in having a
similar bespoke report produced
for your organisation, please
Feature: Europe 2021 (part 1) 24
contact:
Reihaneh Fakhari Feature: Europe 2021 (part 2) 27
T: +44 (0)20 7779 8220
M: +44 (0)79 8075 6761
E: Reihaneh@structuredretail Feature: Priips – full circle 30
products.com
Q&A: Société Générale 32
REPRINT POLICY:
SRP’s Reprint Policy: Articles published by
SRP can be sent to sources for reference Q&A: Aydo 34
and for internal use only (including
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: SG Forge 36
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that is accessible by anyone with a web
browser and access to the internet),
SRP offers reprints, PDFs of articles or
Q&A: Fortem Capital 38
advertisements, and the licensing to
republish any content published on the
SRP website. Prices vary depending Roundup: Crypto news 40
on size, quantity and any additional
requirements. To request authorisation
to republish any Q&A, profile or feature
published by SRP, please contact: Expert View: Coping with market corrections 44
info@structuredretailproducts.com.
Analysis: The cliquet 46
Product wrap 48
People moves 51
Front cover image: BIOD/AdobeStock
www.structuredretailproducts.com 3
NEWS | EUROPE
Marex launches public offering in Italy
Marex Financial Products has entered the Italian retail market with a new
certificate range targeted at financial advisors, private banks, family offices, and
asset and wealth managers.
institutional market, but to get the Italian our flexibility, innovation and technology
desk off the ground in nine months and in the retail market and fill an existing gap
go from private placements into a full in the Italian market – some products
public offer programme with best-in- take up to 10 days to be listed,” said
class capabilities – coupled with our Burgerhout.
focus on innovation - is a remarkable
achievement from our Financial Products Marex is going to Italy first as most
team.” other European markets are accessible
on a non-listed and private placement
Joost Burgehout, head of financial basis.
products at Marex, added: “We’re
replicating what we have done so far at “In Italy if you want to offer products
Marex Financial Products in the Italian to retail, they have to be listed. We
public offering market. want to go all the way with the most
comprehensive product governance
“We are entering the market as a new framework. With this set up we can now
issuer with full retail eligibility – listing, enter any other European market. There
market making, full public offerings. We are some markets on our short-term
will be working on a fast-track basis and roadmap including Switzerland,” said
will have one of the fastest to market Burgerhout.
service for the market: design the
product today/list tomorrow, which is “Our target market in Italy is the buy-
T
something not many players can do,” said side – private banks, wealth managers
Burgerhout. and financial advisors. These clients
his is part of an initiative the will provide an indication of the kind of
company started last year to Some issuer banks have taken up to two products investors want to see in the
launch into the retail market. It years to have this kind of set up ready market and we will respond accordingly.
has taken Marex nine months and their time to market is usually longer. We will offer value for money and speed
to register the brand-new to market,” said Burgerhout.
issuance programme and launch its “We have set up everything from
Italian desk which was set up in record scratch – suitability, full public offer The product offering will be based on
time after the onboarding of two former documentation, contracts, technical certificates and the differentiation will
Exane directors – Antonio Manfre and connections to get real-time quoting come through thematic baskets as well as
Carlo Siriani – and a third member, Guido capabilities etc. We think we can leverage fast track listing access.
Clemente.
The team responsible for the Italian and
Ticino certificates will develop a range
of cross-asset investment certificates
in equity, credit, FX, commodities and
funds backed by Marex Financial’s BBB
investment grade rating from S&P Global
In Italy if you want to offer
Ratings, which will be listed on the
EuroTLX exchange. products to retail, they have to
“This is quite a big step for the
company,” said Nilesh Jethwa (pictured),
be listed
chief executive officer at Marex Solutions
Division. “Our initial strength was the
4 www.structuredretailproducts.com
SRPInsight
NEWS | EUROPE
CACIB launches first structured product
designed to offset carbon emissions
LCL and Crédit Agricole CIB (CACIB) have partnered to launch the LCL Net Zero
Carbon March 2022.
The structured product meets European Management - who want to reduce their and EU’s objectives,” said Bouayad. “In
Benchmark Regulation criteria and exposure to climate risks and seize the our approach both the wrapper and the
includes a mechanism to offset the opportunities offered by the transition underlying index should contribute to
investment’s residual carbon emissions. towards a low carbon economy,” said reduce GHG emissions. With the use of
Bouayad. a Green note that encourage the energy
This joint initiative is part of Crédit Agricole transition and the use of EU BMR Paris
group’s Social Project and the bank’s The product includes two levers to steer Aligned Benchmark the objective is met
commitment to reach carbon neutrality by the energy mix towards a decarbonisation as the GHG reduction reaches nearly
2050. of energy consumption including the 80%.”
reduction of greenhouse gas emissions
“As a pioneer in climate finance, we and offsetting the investment’s residual According to Bouayad, the bank has
believe it is imperative to decarbonise CO2 emissions. received “multiple requests to continue
our economies and to offer our investors the development of our sustainable
solutions to reach this ambition,” Mahdi Indexed to the MSCI Euro Climate Select product range with on the one hand
Bouayad, head of ESG & index solutions, 50 Paris Aligned 5% Decrement Index, the addition of new indices covering
CACIB told SRP. the new investment product primarily themes such as social equality, water or
aims to reduce carbon footprint in biodiversity and on the other hand the
“Knowing our commitment to reduce our compliance with the European Union’s addition of new features related to the
carbon footprint by 2050 in line with the decarbonisation trajectory. wrapper”.
Paris Agreement, this structured product
not only aligns our investors investments The MSCI Euro Climate Select 50 Paris The new LCL Net Zero Carbon March
with science-based emissions reduction Aligned 5% Decrement Index aims to 2022 also includes the use of part of
targets but also goes beyond that with the immediately reduce the weighted average Crédit Agricole CIB’s portfolio of eligible
use of carbon offsets.” carbon intensity by 50%, followed by green assets to refinance projects that
an additional 7% decarbonisation each encourage the energy transition, the
The French bank is seeking to year. In addition, it pursues a range of reduction of CO2 emissions, or promote
strengthen its position at the forefront secondary goals, such as increasing the the circular economy.
of developments related to sustainable weight of companies in the index with
investing with new tailored structured clear carbon footprint reduction targets. LCL and Crédit Agricole CIB have
solutions. included an offsetting mechanism for the
“Carbon offsetting does not make sense residual emissions of the investment by
“LCL Net Zero Carbon March 2022 is if it is not associated with an achievement supporting the Yedeni project in Ethiopia,
designed to meet the needs of investors - of a massive carbon emissions reduction which aims to tackle deforestation in the
clients of LCL Private Banking and Wealth consistent with Paris Agreement goals Bale ecoregion.
In our approach both the wrapper and the
underlying index should contribute to reduce
GHG emissions
www.structuredretailproducts.com 5
NEWS | EUROPE
UK manager releases ultra-defensive
callable structure
Structured product plan manager Idad has started 2022 by bringing an ultra-
defensive callable play to the UK market.
returns with very limited downside risk “I think we are looking at rates going up
as the callable feature adds value,” said considerably this year in general however,
Thom Gascoigne (pictured), head of Idad If the war continues, or if it gets worse, we
UK, adding that the autocallable space in may see further volatility – recently GBP
the UK market is very crowded with not SWAPs dropped 30 basis points but have
many alternative investment choices for since recovered,” he said.
UK investors
This rise in rates may allow for capital
Because it is not an autocallable product protected products, but investors will also
that clients are very familiar with, some be looking at inflation and real returns.
clients have been reluctant.
“It is a tricky time for investors. During
“When you explain the structure and Covid we had a massive drop off in
the value most people like it. Even if markets,” said Gascoigne. “This was
the product is called, investors get 8% unprecedented; however, we saw a big
pa which is quite a good deal,” said swing back in equity markets. Sadly,
Gascoigne. “With the equity markets with this current situation in the Ukraine
falling recently it’s maybe less likely the there is a lot of uncertainty but this leads
issuing bank will call the products.” to opportunities too, especially with
The UK firm partnered with Société structured products.
Générale to launch the Ultra Defensive “However, when you get a high multiple
Callable Supertracker Plan, the first on the participation, the likelihood of the “Market dislocations can help some
single index callable plan offering 430% issuer cooling the products is obviously payoff structures to take advantage of the
participation in the FTSE 100 index or 8% higher when markets recover,” he said. pricing environment as many products in
pa if the issuer calls the product early. the UK are funded by selling volatility.”
The ultra-defensive feature comes in the The new callable play also fits within
form of 40% downside protection barrier, Idad’s strategy to continuously expand There are 36 live callable structures with
meaning that for capital to be at risk the its offering by diversifying the products it different payoff combinations in the UK
FTSE 100 needs to fall by more than 60% offers and finding differentiators with its market, SRP data shows. Idad has over
at maturity. UK competitors. 180 live products half of which have been
issued by BBVA. Other counterparties
“A select few banks are pricing the Gascoigne remains positive on the used by the UK distributor include
callable feature very aggressively so you market outlook despite inflation creeping Commerzbank, Goldman Sachs, UBS and
can afford to put the barrier much lower. up all across the globe and differing SG Issuer featuring in four live products
We were able to achieve attractive upside bullish/bearish opinions on rates. with BNP Paribas.
Even if the product is called, investors get 8% pa
which is quite a good deal
6 www.structuredretailproducts.com
SRPInsight
NEWS | EUROPE
Bpost offers full capital protection on S&P
water index
Bpost Bank has launched Global Water Participation 03/2032 in Belgium.
The 10-year capital guaranteed note offers 31 December 2021. They were all issued
100% exposure to the S&P Global Water on the paper of BNP Paribas and offered
EUR Net Total Return Index, capped at at least 90% capital protection.
30%. The final index level is subjected to
37 months backend averaging, minus an Eight of its structures were steepeners
adjustment factor of five percent on an We have a large that paid a coupon based on the
annual basis. The product is issued via the difference between the 30-year EUR
Luxembourg domiciled BNP Paribas Fortis
proportion of Constant Maturity Swap (CMS) rate and
Funding vehicle, while BNP Paribas Fortis conservative investors the five-year EUR CMS rate.
acts as the guarantor.
among our clientele Six products were tied to a single
There is also a 90% capital-protected index, including the Solactive Eurozone
version of this product which is issued via Exporters Efficient Index (three products),
BNP Paribas Issuance BV. S&P Global Infrastructure Index (two) and
the S&P Global Water Index (one).
“These products are aimed at retail
investors who strive for a higher return Bpost Bank, which mainly distributes its As of 23 February 2022, the bank
than what can be obtained on a savings products through its network of 660 post has 182 live structured products worth
deposit today, and, at the same time, offices, held a six percent share of the approximately €1.2 billion listed on the
want to benefit from full or partial capital Belgian structured products market in SRP Belgium database. Of these, 43
protection,” said a product manager at 2021. products (€182m) offered 90% capital
Bpost Bank. protection, with the remaining 139
The bank sold 15 products worth a structures (€970m) fully preserving the
The underlying S&P Global Water Index combined €83m between 1 January and capital invested.
tracks 50 companies from around the
world that are involved in water related
businesses. The 50 constituents are
distributed equally between two clusters Bpost Bank: sales volumes by capital protection (EURm)
of water related businesses: water utilities
& infrastructure and water equipment &
250
materials.
The index, which was first launched in 200
February 2007, is modified market cap 57.0 59.6
weighted. The highest weighted company
in the index is American Water Works 150 52.1
(9.68%) followed by Xylem (7.94%) and 24.0
Veolia Environnement (6.39%). 100
155.6 148.7 2.7
The fact that after 10 years the product 120.5
50 116.1
returns 100% of the nominal invested 80.5
(excluding costs) is an important element
for the bank and its clients. 0
2017 2018 2019 2020 2021
“We have a large proportion of
conservative, cautious investors among 100% capital return 90% capi tal return
our clientele, who, while looking for a
higher return, are willing to take little or no Source: StructuredRetailProducts.com
risk,” the banker said.
www.structuredretailproducts.com 7
NEWS | EUROPE
BBVA dispatches new QIS ESG strategy
BBVA Quantitative Investment Strategies (QIS) has expanded its range of
underlyings with the launch of the new Solactive BBVA Resource Scarcity index.
“Today, these valuables appear more most efficient and convenient wrapper,”
critical than ever to the needs of a global said Enrile. “The index is available also in
society increasingly concerned with the risk control and decrement versions.”
effects of the rapid population growth
and climate change,” he told SRP. “In this Other QIS strategies offered by BBVA
context, some firms are actively gearing client’s include the Solactive BBVA ixESG
their business to ensure the flow of Global Leaders, Solactive BBVA Climate
these natural assets and promote the Action PAB Europe, Solactive BBVA
maximum efficiency of their uses. Climate Action CTB Europe, Solactive
360 Euro IG Corporate CTB, Solactive
“Our best-in-class analysis capabilities BBVA ixS Global Inclusive Growth,
allow us to deep dive into the roots of Solactive BBVA ixG Global Governance
the resource scarcity theme, assessing and Board Diversity, Solactive BBVA
its value drivers, and identifying the sub- Next Generation Networks, Solactive
industries that will benefit the most from BBVA Cybersecurity, and Solactive BBVA
its future evolution.” Health and Wellness.
According to Enrile, the unique thematic “We are planning to grow our product
manufacturing process embedded in and service offering in 2022, expanding
The index launched in partnership the index, will provide investors with it to cover other themes and asset
with Solactive is aimed at capturing a comprehensive, cost-efficient and classes,” said Enrile. “Alongside these
alpha from the resource scarcity transparent tool to gain exposure to this plans we are also working closely with
megatrend and selects companies theme. clients developing tailor-made indices
harnessing nature’s most unscattered to meet their specific investment
riches including easing water and food The top five constituents of the index by requirements.”
supply, improving forestry and mineral weight include EOG Resources (6.71%),
harvesting, managing urban physical Anglo American (5.45%), Zoetis (5.45%), SRP data shows that the Spanish bank
space and providing the energy of TC Energy Corp (5.08%) and Pioneer has marketed more than 50 publicly
tomorrow. Natural Resources (4.77%). offered structures in the Mexican market
tracking three of its QIS strategies
The unmatched level of human Investors will be able to play this including the Solactive BBVA ixESG
development and prosperity achieved thematic index strategy via “a wide range Lideres Globales MXN Risk Control 10%
in the last few decades has run of actionable investment alternatives” index (39 products/US$111.2m), Solactive
parallel to the overuse and erosion of including total return swap (TRS), BBVA Next Generation Networks MXN
natural resources, according to Javier autocallable and participation products, Risk Control 10% Index (seven products/
Enrile (pictured), global head of sales, as well as plain vanilla derivatives. US$43.6m), and Solactive BBVA Health &
quantitative investment strategies (QIS) Wellness SIC MXN Hedged Risk Control
at BBVA. “[We are] always looking to provide the 10% Index (seven products/US$8.9m).
Our best-in-class analysis capabilities allow us to deep
dive into the roots of the resource scarcity theme
8 www.structuredretailproducts.com
SRPInsight
NEWS | EUROPE
Spotlight on… top issuers in France
2021 was an excellent year for the French structured products market.
Sales volumes, at an estimated €23.4 €7.9 billion from 1,122 publicly distributed Crédit Mutuel CIC completed the top five
billion, were up by more than 50% year- products, which were almost exclusively with a 5.1% market share from 66 products
on-year (FY2020: €15.4 billion), while issued on the paper of SG Issuer. sold (€1.2 billion)
issuance stood at approximately 2,500
products, an increase of 26% from the In Second, Crédit Agricole held a 20% The highest ranking non-French group
prior year (1,988). market share, collecting €4.7 billion was Citi. The US bank collected €780m
from 145 products. The group issued its from 114 products sold (3.3% market
In fact, sales were at their highest levels products via LCL Emissions, Amundi and share). Citi was the first to offer French
since the launch of the SRP France its corporate and investment bank (CIB). investors access to autocalls on single
database in 2004. The previous high was The former achieved the highest sales, at stock decrement indices, including
reached in 2007 when volumes reached €2.2 billion (from 14 products), including iStoxx FP GR Decrement 2.54 Price EUR
€22.8 billion, although back then it was €455m that was collected by LCL Index (TotalEnergies), iStoxx ORA GR
achieved from far fewer products (251), Autocall AV Mars 2021, which was the Decrement 0.7 EUR Index (Orange), and
according to SRP data. best-selling French product for the year. iStoxx Engi GR Decrement 0.71 Price EUR
Index (Engie).
Thirteen issuer groups were active during BNP Paribas issued 634 products,
the year. They included all the main predominately through its Dutch Crédit Mutuel Arkéa also made the top 10,
French providers and a number of foreign domiciled BNP Paribas Issuance BV with a market share of 2.6%, which meant
(mainly US) investment banks. vehicle. The bank sold an estimated €4.3 that French institutions captured 88.6% of
billion – the equivalent of an 18.7% market their local market in 2021.
Société Générale was the number one share – while Natixis in fourth place
provider with a 33.7% share of the French captured 9.4% of the market (€2.1 billion Disclaimer: data refers to public
market. It accumulated estimated sales of from 111 products). distribution products only.
France: top 10 issuer groups by market share in 2021*
Société Générale - 34.9%
Crédit Agricol e - 20%
BNP Pari bas - 18.7%
Natixis - 9.4%
Citi - 3.5%
Goldman Sachs - 3.3%
Crédit Mutuel Arkéa - 2.7%
Crédit Mutuel - CIC - 2.5%
Morgan Stanley - 2%
Credit Suisse - 1.1%
Others - 1.9%
*Public distribution only, excl. flow- and leverage products Source: StructuredRetailProducts.com
www.structuredretailproducts.com 9
NEWS: AMERICAS
US: Structured products through the decade
In light of the US structured products market crossing US$100 billion in sales volumes
at the end of 2021, SRP takes a look back over the course of a decade to track the
evolution of the rapidly growing industry and chart shifts in investor behaviour.
to gain more upside potential amid the The most dominant issuer of MLCDs in
Covid-19 market crash. 2011 was HSBC Bank with US$3.4 billion
in sales across 194 products, followed by
According to Deryk Rhodes (pictured), J.P. Morgan Chase (379/US$1.4 billion),
head of MLP trading and origination at and Wells Fargo (43/US$625m).
InspereX, the milestone event of the
market crossing US$100 billion in sales In 2021, J.P. Morgan Chase Financial
was inevitable. accounted for most sales with US$103m
(138) while Citigroup Global Markets
“There has been a long continual issued US$134m in sales across 86
effort to educate financial advisers on products.
the many attributes of market-linked
products. We are seeing the product “The market is much more mature than
really take hold and become a regular it was five or six years ago. The increase
component of an advisor’s business,” in adviser understanding of structured
he says. products as risk management solutions
has meant an increased comfort
The firm has seen the rise of with principal at risk and the benefits
autocallables over the last few years structured products can provide within
which has also helped spur the jump in client portfolios,” says Rhodes.
The US market has more than doubled notional.
in size since 2011 in which total sales While the structured product market is
figures for the year amounted to “Even in light of the recent equity much more mature it remains in people’s
US$45.7 billion across 9,631 structured correction with rates returning to pre- minds as relatively untapped while the
products. This represents a 120% covid levels I think 2022 will be another visibility of these products could still be
increase to the market’s current figure of good year,” says Rhodes. greater.
US$100.9 billion over 31,553 products.
Three years earlier, the Lehman In addition, the market saw a major “When the market is upward trending
Brothers’ collapse shattered the industry shift in accounts gravitating from investors aren’t always looking to buy
but the US market remained the fastest market-linked certificates of deposits risk managed solutions, but when
growing markets in the world. (MLCD) wrappers to principal protected the market turns, they become much
notes and particularly non-principal more in vogue again. So, continuing
The total outstanding over the last protected notes in recent years to educate on the product remains the
decade has also skyrocketed with a with autocallable structures rising in core of what we are looking to do in
178% growth – 2011: US$80 billion; popularity as well as new underliers and 2022,” says Rhodes.
2022: US$223 billion. wrapping thematic ETFs.
BASKETS OVERTAKE
Sales volumes remained steady and MLCDS FADE US investors have also recently
rarely fluctuated until 2017 in which SRP charts the sharp shift of investors gravitated towards index baskets as can
figures shot up to US$55 billion (11,777 away from MLCDs began to occur be noted in 2021 when they became
products) from US$43 billion in the in 2020 after sales began gradually the most popular underlying, overtaking
previous year. decreasing over the years. In 2011, single indices which were previously
sales of CD wrappers stood at a dominant.
After which, sales followed an upward record peak of US$7.5 billion over 1,314
trajectory hitting US$77 billion at products. This figure has dropped to just Index basket equities accounted for
the end of 2020, a pivotal year for US$237m across 224 products in 2021, US$32.5 billion in sales during 2021,
structured products, which finally rose to highlighting the steep fall in interest from a 43% increase from its 2020 figure
prominence among investors scrambling US investors. of US$22.7 billion. This category
10 www.structuredretailproducts.comSRPInsight
NEWS: AMERICAS
collected just US$2 billion in sales in The best-seller of 2021 - the Accelerated Capped calls made a comeback in
2011 and ranked far behind single index Return Notes - S&P 500 (06747W187) 2015 alongside enhanced trackers
and single share equity assets which sold for US$137m. Issued by Barclays and protected trackers which ranked
accrued US$16.8 billion and US$10.2 Bank and distributed by Merrill Lynch, first on payoff league tables until
billion, respectively. the growth note featured an enhanced 2020. Since then, knock out, reverse
tracker and capped call payoff while convertible, as well as worst of
The market has also seen the deviation tracking the S&P500. option payoffs have re-bounded and
away from FX Rate assets over the past accounted for US$11.8 billion in 2020
decade, collecting just US$14m over According to Tom Baughman (pictured), and US$16.3 billion in 2021.
seven products in 2021, compared with managing director, Private Wealth
US$1.7 billion in sales over 239 products Solutions at iCapital, Steve Czick, managing director,
in 2011. private wealth solutions at iCapital
the multiple short bouts of increased says that as the market has shifted to
The best-selling product in 2011 was volatility in 2021 provided an optimal overwhelmingly favoring yield products,
the STEP Income Securities – Ford market for structured products sales. the process for advisers has become
note distributed by Merrill Lynch worth more burdensome.
US$185m. With a tenor of just over a “All major indices were way up for the
year, the growth and income product year and this environment allowed for “This extends to having to monitor
featured a reverse convertible and most callable products to get called at callability, coupon payments, barrier
digital payoff type and was issued by least once during the year and terms still breaches, etc. For a lot of heavy
Svensk Exportkredit. looked attractive to investors because buyers of structured products, it almost
of the periodic spikes in volatility that we becomes a business within a business.
Tracking a single share of Ford Motor, saw,” he says. Also, with that same shift to yield,
the product reached maturity on 23 the market has become too tilted for
March 2012. Investors collected the There is also a larger interest in single issuers, where the same type of risk is
9.75% p.a. paid quarterly throughout stock worst of products than seen in continually being added to their books,
the investment period, but at maturity years past. “Investors are hungry for yield rather than having products offset,” he
they received 99.09% of their initial and using single stocks are getting them says.
investment. into the double digits for annual coupons.
Two-thirds of the flow were callables As we progress into 2022, two main
Throughout the years, dominant while mostly two to three indices in a themes will dominate the year ahead.
distributors of best-selling products worst-of structure,” says Baughman. These include the growth of new
fluctuated between Merrill Lynch, Bank wrappers such as separately managed
of America, and J.P. Morgan. However, SHIFTING PROFILES accounts that will significantly improve
in 2017, a non-public distributor was Payoff combinations have differed the purchasing and after-market process
behind the best-selling Raymond James since 2011 as well with uncapped call/ for adviser.
Analysts’ Best Picks Notes - Share enhanced tracker types collecting the
Basket (06367TQJ2). highest sales (US$10.8 billion). This “We can also anticipate an increase
combination remained dominant until in new vol-targeted yield indices,
Selling for US$310m, the growth note 2014 when it was surpassed by knock- so issuers will begin competing on
was issued by the Bank of Montreal and out/reverse convertible structures which innovation, not just coupon levels,”
reached maturity on 29 January 2018. totalled US$8.1 billion. says Czick.
When the market turns, risk managed
solutions become much more in vogue
www.structuredretailproducts.com 11NEWS: AMERICAS
Annuity regulator seeks to tighten up Rila
features
The US insurance regulator has developed new guidelines for technical changes to
registered index-linked annuity values. These would bring the products in line with
traditional variable annuities (VA).
Regulation, and Model 805, Standard The firm says that the exposure could
Nonforfeiture Law for Individual Deferred be interpreted to require that the profit
Annuities. provisions, spread, and expenses be
presented as an explicit fee disclosed in
According to a letter penned by the ACLI the contract which is different from the
and CAI, there are technical aspects of design of the product in the marketplace.
the exposure which do not align with
the realities of how Rila products are ‘The explicit fee approach would remove
manufactured. simplicity and result in an unnecessary
disruption to the ILVA marketplace and
‘Instituting the Interim Value framework impact consumer product choice.’
as drafted could adversely impact the
core design principles used to create Registered index-linked annuity sales
Rilas. Additionally, it appears to us that broke records in the fourth quarter and
the exposure is too restrictive and would for the year, according to the Secure
not meet some of the Subgroup’s own Retirement Institute (SRI).
The National Association of Insurance objectives, including fostering product
Commissioners (NAIC) has issued an innovation responsive to the lifetime Q4 21 Rila sales were US$10.6 billion,
actuarial guideline on registered index- income challenge that retirement presents 26% higher than prior year. Sales for the
linked annuities (Rila) to finetune the for millions of Americans,’ stated the letter. entire year stand at US$39 billion, a 62%
product design of those retirement increase from the prior year.
products amid a significant growth in According to the industry trade bodies,
demand among investors. Rilas are fundamentally spread-based “Overall, Rilas have been making
products, not fee-based products unlike more noise in the industry than FIAs
The new guidelines have been published conventional variable annuities. because they have more upside
after a consultation open to public potential,” said Tamiko Toland (pictured),
commentary for a 60-day period which ‘Insurers manufacture Rila products by annuities director at Cannex. “When
ended 22 January of which several investing in fixed income assets with you conceptualise them FIAs as fixed
industry players chimed in to give their a return that covers the cost of liability annuities and not as a structured product
insights, such as Prudential, the American benefits, expenses and profit/risk (even though they're both very much
Council of Life Insurers (ACLI) and the margins. In this respect, Rilas share many structured), the fact that you cannot lose
Committee of American Insurers (CAI). core manufacturing concepts with fixed money is important with the FIA, as far as
indexed annuities.’ what the clients can expect,” she said.
The NAIC task force initially created a
subgroup in mid-2021 to solely focus on Prudential has also provided feedback As the market continues to see plain
the Rilas which would later prompt the on the guidelines and gave the vanilla Rilas grow, annuity regulators
guideline for technical changes to Rila recommendation of a clarification in will continue to tighten guidelines
values, also known in the US market as language of the exposure to promote surrounding this popular retirement
index-linked variable annuities (ILVA), consumer choice to spread based or product.
that would bring the products in line with explicit fee type products.
traditional variable annuities (VAs). “Rilas are going strong and the biggest
‘Specifically, we recommend a new risks for these products come from
Industry players do not appear to be requirement, in the form of an actuarial either a dramatic change in economic
in support of the proposed guidelines certification to regulators attesting that conditions that would make popular
while the issue for regulators stems from spreads are reasonable based upon the Rila structures less attractive or an
Rilas not exactly fitting two key model current economic environment,’ stated unexpected regulatory change,” said
laws: Model 250, Variable Annuity Model Prudential in its letter. Toland.
12 www.structuredretailproducts.comSRPInsight
NEWS: AMERICAS
JPM MerQube vol target play crosses
US$200m in sales
The MerQube US Tech+ Vol Advantage Index first appeared in the market in the
summer of 2021.
observation date. Otherwise, no coupon at just performance that one can get out of
is paid for that period. intraday dislocations.”
While J.P. Morgan is responsible for issuing UNDERLYING ASSETS
all the structures - the bank distributed Srivastava highlights that although
104 products worth US$167m, InspereX innovation is at the forefront of index
(formerly known as Incapital) has issued evolution, integrating particular themes
the other 38 products which had a sales such as cryptocurrency pose certain
volume of US$28.7m. difficulties.
Dominant payoffs include knock out “The biggest challenge with structured
(139/US$194m), reverse convertible products using crypto, whether it's using
(112/US$156m), protected tracker (30/ futures or whether it’s using spot is just the
US$40.5m), snowball (six/US$8.3m), and availability of options,” he said. “In order
enhanced tracker (three/US$2.6m). to guarantee any payout, you need to be
able to hedge the options that you have
According to Vinit Srivastava (pictured), written or bought, and that is not any easy
founder of MerQube, the appeal of task, because the banks themselves are
intraday strategies comes primarily from not participating in that.”
the perspective of better option pricing.
Although multi-asset index strategies
The volatility controlled proprietary “In the case of a vol target index, clients are becoming more mainstream, the
underlying developed by US start-up index were paying close to 6% volatility on a market direction could play against them,
provider MerQube has now amassed typical 5% volatility index for option costs according to Srivastava.
US$196m in structured product sales and now with intraday strategies, which
across 142 structures, SRP data shows. might be very similar in terms of the “With the current rate environment that's
performance, those hedging costs would coming up, I would say we might see a
The index was exclusively licensed to typically come down,” he said. comeback on equity underlyings because
J.P. Morgan in mid-July 2021 – the US that was one of the key reasons why
investment bank also led a Series A “The savings on that are attractive and are buying started to go a lot into multi-assets.
funding worth US$5m for MerQube to the reason why clients harbour an interest The pricing on a multi-asset basket was
drive its international expansion and in such intraday strategies in terms of a much better than what they could get
accelerate platform development. hedging perspective, rather than looking through equity,” he said.
To-date, the best-selling structure tied to
the MerQube US Tech+ Vol Advantage
Index is the Auto Callable Contingent
Interest Notes - MerQube US Tech+ Vol
Advantage Index (48132WDG1). Selling
for US$16.85m, the note which struck on
August 2021 features a knock out and
The biggest challenge with
reverse convertible payoff type and is
expected to reach maturity in five years. structured products using crypto
The income product pays a quarterly
coupon of 10% pa. if the underlying
is the availability of options
is greater than or equal to 60% of
its respective initial level on each
www.structuredretailproducts.com 13NEWS: AMERICAS
CS RavenPack AI play reaches US$1bn trades
The bespoke index developed by the Swiss bank and RavenPack for the US structured
products market has delivered an annualised performance of 6.7% since its launch.
The index also implements a strategy special so we were eager to work with
that combines equities and fixed income, them,” said Heraty. “When we formed
complemented by a daily risk control the partnership, we knew that we could
mechanism. The index has recorded build an index that could be delivered
a 6.7% annualised performance* since to various markets such as structured
its launch in 2017, and has provided “a products and retirement products from
window into systematic asset allocations insurance companies.
selected by sophisticated data-driven
analysis”. “By bringing together complementary
expertise, Credit Suisse and RavenPack
“The amount of relevant published have provided an objective and
information about all available tradable quantitative approach to information
assets makes it impossible for analysts gathering.”
and investors to read and understand it
all,” said Armando Gonzalez, president “This milestone achievement illustrates
and CEO, RavenPack. “Natural language how artificial intelligence has reshaped
processing creates an opportunity for the landscape of equity investment:
innovation in automating the analysis sentiment analysis now drives alpha
Credit Suisse has traded more than US$1 of not just what’s being said, but how discovery,” said Gonzalez.
billion in notional in derivatives linked information is being perceived.”
to the Credit Suisse RavenPack Artificial Outside the annuities market a risk
Intelligence Index (Bloomberg ticker: According to Gonzalez, the equity control version of the index, the Credit
CSRPAI5E Index), as of 31 December 2021. component of the Credit Suisse Suisse RavenPack AIS Balanced 5% ER
RavenPack Artificial Intelligence Index Index, has featured across 64 structured
The index was launched in 2017 as a leverages sentiment scoring applied to notes in the US market worth US18.87m.
result of a collaboration between Credit news data extracted by the RavenPack
Suisse and RavenPack to leverage the news analytics algorithm that seeks to SRP data shows that Credit Suisse
power of big data analytics to make anticipate relative price movements and has used 68 own-branded proprietary
sector allocation decisions in a tradable make more informed sector selections. indices across more than 650 structured
and systematic way within an index. products sold across 20 retail markets.
“AI is now one of the most important
“Investors have shown interest in artificial tools for creating products anywhere Some of the most featured indices
intelligence and natural language in the US along with external markets,” developed by the bank's QIS team
processing,” Mike Heraty (pictured), head he said. “Credit Suisse has unique include the Credit Suisse FX Factor SEK
of institutional solutions at Credit Suisse, and innovative ideas in terms of their Excess Return, Credit Suisse RALL Holt
told SRP. “We were not surprised that the approach, and the way they thought Index, Credit Suisse HOLT European
index reached this notional milestone about the use of sentiment analysis Dividends Synthetic Return Index, Credit
because it's a unique thematic and was and the construction of more formal Suisse / Tremont Long-Short Equity
thoughtfully constructed.” products was key in helping us realise Sector Invest Index, Credit Suisse /
the potential of a collaboration”. Tremont Investable Index, Credit Suisse
The Credit Suisse Ravenpack AI Index / Tremont Hedge Fund Index, Credit
aims to gain exposure to sectors of the The success of the Ravenpack AI Suisse / Tremont Event Driven Sector
US economy with stronger sentiment Index is also due in part to the Invest Index, and Credit Suisse / Tremont
as determined by a news analytics positive momentum that quantitative Emerging Markets Sector Invest Index.
algorithm developed by RavenPack, investment strategies (QIS) have
which uses Natural Language Processing experienced in the broader *Source: Credit Suisse. Bloomberg.
(NLP) models to objectively analyse marketplace, according to Heraty. Data collected from 6 October 2017 to
thousands of company news published 31 December 2021. Past performance
by reputable sources across the globe in “Back in 2017, we quickly recognised (actual or simulated) is not an indicator of
milliseconds. that the engine RavenPack had built was future performance.
14 www.structuredretailproducts.comSRPInsight
NEWS: AMERICAS
Spotlight on… top issuers in Mexico
Monex and BBVA dominated the market with their currency-linked products.
Some MXN300 billion (US$14.9 billion) range, digital and dual currency payoffs. share. It sold 143 products (MXN13.8
was collected from 5,612 structured All of Monex’ products were linked to the billion) via its Banamex subsidiary.
products that were issued in Mexico appreciation of the US dollar relative to Approximately halve of its issuance was
during 2021. the Mexican peso. linked to the USD/MXN currency pair with
dual currency the preferred payoff.
Volumes were down 12% on the previous BBVA México, in second, held a
year (2020: MXN348 billion from 5,866 30.2% share of the market. It achieved Banco Santander and Scotiabank
products) with almost 80% of all sales sales of MXN90.5 billion from 1,599 held a market share of 2.2% and 1.2%,
coming from products tied to FX rates issued products, which, apart from respectively. The former collected
(MXN233 billion). deposits and bonds, also included 540 MXN6.6 billion from 114 products, which
warrants. Payoffs were a mixture of included an American warrant on the
There were five issuer groups active autocalls, dual currency and reverse Financial Select Sector SPDR ETF
during the year. convertibles. (MXN37.6m).
Monex was the main issuer in the The bank, which between 2000-2019 Meanwhile, Scotiabank accumulated
market. The Mexican financial group was known as BBVA Bancomer, was also sales of MXN3.5 billion from just 37
sold 3,719 products worth a combined responsible for the best-selling product products. It was the sole issuer in Mexico
MXN185.6 billion between 1 January and of the year, which came in the shape of that did not offer any dual currency
31 December 2021 – the equivalent of a the ASWP Spread Note. The three-month products, instead focusing on autocalls,
61.9% share of the market. spread option was linked to corporate reverse convertibles and even the odd
bonds and sold MXN4.8 billion during its capped- and uncapped call.
The company’s products were a mix subscription period.
between certificates of deposit and Disclaimer: data refers to public
structured bonds featuring accrual, In third place, Citi claimed a 4.6% market distribution products only.
Mexico: top 5 issuer groups by market share in 2021*
*Public distribution only, excl. flow- and leverage products Source: StructuredRetailProducts.com
www.structuredretailproducts.com 15NEWS: AMERICAS
Citi enters Simon consortium as new investor
The US bank is the latest structured products provider to make a strategic investment
in the platform owned by seven other financial institutions.
The bank said in a statement that in (pictured), head of Americas sales for
‘strategic alignment with the focus solutions for financial intermediaries at
of both companies’ the investment Citi, who has joined the platform’s board
underscores its commitment ‘to cutting- of directors. The US platform closed the
edge technologies’ that can deliver first leg of a strategic financing round of
advisor-facing tools for risk-managed up to US$100m of growth capital in July
solutions and ‘is complementary to 2021 - the Series B round was led by
broader partnership opportunities that WestCap, a growth equity firm founded
exist between the two firms’. by Laurence Tosi, former CFO of Airbnb
and Blackstone, with existing investors
also participating in the round.
Simon reported a year-over-year
increase in volume of 94% and usage of
67%, last week. The platform also closed
Financial professionals several strategic partnerships in 2021 to
Citi has made an undisclosed strategic expand its product offering for financial
investment on Simon Markets, the US are looking to stay professionals and released several
multi-issuer structured products fintech enhancements to its portfolio allocation
company owned by a consortium of seven
ahead of market tool Simon Spectrum to improve the way
financial institutions, including Goldman volatility advisors manage client accounts.
Sachs, Barclays, Credit Suisse, HSBC, J.P.
Morgan, Prudential and Wells Fargo. According to SRP data, there are 6,623
products listed on the Simon Platform
Citi is already plugged into the Simon with a value of US$18.5 billion. Goldman
platform as an issuer of structured ‘Financial professionals today are Sachs with US$10 billion is the most
investments and through its wealth looking to stay ahead of market active issuer on Simon followed by J.P.
management division whose financial volatility and manage client portfolios Morgan, TD Securities and Morgan
professionals use the investment platform. with confidence,’ said Fabrice Hugon Stanley.
Allianz sets aside US$4.2 billion for
Structured Alpha lawsuits
Allianz Group is setting aside €3.7 important step towards a resolution be reliably estimated and Allianz SE
billion (US$4.2 billion) to cover expected of the various proceedings,’ said expects to incur additional expenses
settlements with US investors and Allianz. ‘Discussions with remaining before these matters are finally
government officials over the collapse of plaintiffs, the US Department of Justice resolved, according to the German
its Structured Alpha Funds, the company and the US Securities and Exchange financial services provider.
said on 17 February. Commission remain ongoing and the
timing and nature of any global or In addition, Allianz SE reported that its
The provision booked in its financial coordinated resolution of these matters Solvency II ratio reached 209 percent
statements 2021 has reduced the is not certain.’ as well as the launch of a new share
group’s net income by €2.8 billion. buy-back program for 2022 which will
Therefore, the total financial impact amount to up to €1 billion. Allianz SE will
‘The anticipated settlements are an of the Structured Alpha matter cannot cancel all repurchased shares.
16 www.structuredretailproducts.comSRPInsight
NEWS: AMERICAS
Luma, Morningstar CAIS adds partner
collaborate on structured in platform
expansion push
products data analytics
Luma has teamed up with Morningstar to bring
structured product data and analytics to Morningstar
Advisor Workstation subscribers.
of structured products so financial
professionals can more easily see the
impact to a client’s investment plan.
‘Our collaboration with Morningstar
enables financial professionals to combine
the breadth of our data with their deep US fintech platform CAIS headed
portfolio analysis,’ said Tim Bonacci by CEO Matt Brown (above) has
(pictured), CEO and president of Luma. announced a new partnership
‘This empowers them to determine with Focus Financial Partners to
whether structured products can provide launch a new alternative investment
the right fit for clients and help them more platform to deliver access to a
easily reach their investment objectives.’ range of alternative investments,
According to SRP data, more than 31,500 adviser education, independent due
structured products worth US$100.9 billion diligence, and end-to-end digitised
were issued in the US in 2021 – the highest transaction processing as well as
number, both by issuance and sales, since third-party reporting integrations.
the launch of the SRP US database in 2005.
Luma Financial Technologies, an The CAIS platform will enable Focus
independent multi-issuer structured ‘Adding Luma’s structured products data partner firms to evaluate a range
products and annuities platform, has and modeling to financial professionals’ of alternative investment strategies
signed an agreement with Morningstar toolkits will illustrate important trade-offs and on behalf of their clients. This will
to launch structured products data and empower investors to make better informed include hedge funds, private equity,
analytics within the Morningstar Advisor financial decisions,’ said Kevin Reed, head of private credit, real estate, digital
Workstation. strategic partnerships at Morningstar. assets, and structured notes.
Morningstar will use the data provided In addition to accessing structured CAIS will also seek to launch and
by Luma to analyse, manage, and products data through Morningstar Advisor operate proprietary feeder funds
allocate structured products in an overall Workstation, subscribers will also be able and multi-manager funds - these
client portfolio context. Subsequent to access Luma’s platform directly within customised fund solutions will be
enhancements of Advisor Workstation this solution. In order to fully transact in the exclusively available through the
through 2022 will build on Morningstar’s marketplace, they can elect to enrol as a CAIS Platform, while Focus will
objective to provide deeper classification Luma client. be able to add their own sourced
third-party funds to the platform and
benefit from centralised monitoring,
transacting and reporting.
CAIS will also provide its educational
outlet CAIS IQ to Focus so advisors
Financial professionals can determine if can further improve client outcomes.
CAIS IQ content will also be tailored
structured products are the right fit for clients to meet the needs of each Focus
partner firm.
www.structuredretailproducts.com 17NEWS | APAC
Credit Suisse: China, ESG in spotlight (part 1)
The Swiss bank is working to bring China equity structured products globally as these
assets accounted for nearly half of the assets managed on its SparkTrackers platform.
with stocks categorised according to their Launched in June 2015, the index has
market capitalisation. delivered 11% compounded annual growth
rate with 14% maximum drawdown and 0.9
Two indices over various share classes are Sharpe on a historical backtest.
available tracking the basket, which went
live on 31 December 2020 and 26 April “The index has been delivered to retail
2021, respectively. They are re-balanced and distribution clients through a variety
on a monthly basis. of products including principal-protected
notes and warrants, alpha and delta-one
“China equity is less correlated to certificates,” said Florentin.
developed and emerging market equity,
and has significantly outperformed Following the most recent launch on
during the Covid crisis,” said Florentin. the future food theme, which once took
“Our China-related solutions are able the SparkTrackers’ AuM to US$900m
to monetise some of the repurchase in August 2021, Credit Suisse plans to
agreement we get on China names, introduce a brand-new theme in the
potentially passing it to clients through coming two months.
The proprietary issuance platform for outperformance transactions.”
tracker certificates on thematic indices AMCS
currently has assets under management Primarily manufactured in Apac, the In addition to the tracker certificates, Credit
(AuM) of approximately US$800m. open-ended delta one certificates are Suisse Asset Management is running an
exclusively issued and distributed by actively managed certificate (AMC) on the
“The demand for structured products on Credit Suisse or its affiliates. China Connect, which is one of the "most
China equity has remained strong overall successful mandate solutions” investing
since 2020 [as] China is opening up to the The investment bank has also introduced in both the Shanghai-Hong Kong Stock
world,” said Clement Florentin, head of the China Southbound Long Short Index Connect and the Shenzhen-Hong Kong
investment solution Asia ex-Japan & co- to capture the opportunities arising from Stock Connect, according to Florentin.
global head of QIS distribution structuring the opening of China’s capital markets.
at Credit Suisse (pictured). “The increased Developed by its quant research team, the “The AMCs managed by asset allocators
incorporation of China equity to major offering aims to monetise the premium of in Asia are increasingly delivered globally,”
benchmarks has also been driving capital the Southbound programme, which allows he said.
flows to the region.” qualified Chinese investors to access
eligible Hong Kong shares. Manufactured in Hong Kong SAR, the
At SparkTrackers, a total of 22 indices have China Connect AMC has been traded
gone live since September 2018 across “The offshore stocks purchased by globally on Quantum – the bank’s
14 themes comprising Asia online gaming, onshore investors tend to outperform,” proprietary platform to create and manage
electric vehicle (EV) power, 5G Frontier, said Florentin, adding that those investors bespoke indices across equity, fixed
China healthcare, cloud computing, show unique investment preferences and income, commodity, foreign exchange and
rising China brands, post-pandemic likely possess an information advantage. quantitative investment strategies (QIS) on
recovery, sustainable China, accelerating a discretionary basis. SparkTrackers also
economy spark, ESG top pics, CS top pics, China onshore investors hold 10.7% of leverages on Quantum allowing content,
hydrogen, PremiaTracker Southbound and Hong Kong free float market cap and execution and delivery services.
future food. account for over 20% of turnover in
Hong Kong SAR, according to the bank’s Compared with other investment solutions
Among them, the Sustainable China estimates. The Swiss bank invests in desks in Apac, which primarily focus
Index stands out, being deployed with stocks with large southbound flows by on transaction origination and content
a quantitative and systematic strategy. adopting a ‘glass-box’ machine learning distribution, the investment solution
The basket selects around 70 out of 100 approach, in which the user can see how group (ISG) team at Credit Suisse in
companies in renewable energy, smart the model works and reaches its decision Apac also specialises in origination and
grid and environmental protection spaces, by following the steps from inputs to manufacturing while additionally acting as
including both producers and suppliers, outputs in contrast to ‘black box’. a platform, noted Florentin.
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