SRPInsight - POSITIVE IMPACT - Structured Retail Products
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SRPInsight Issue 10 | November/December 2021 @SRP_Insider
POSITIVE
IMPACT
LATEST // MAREX & FIRST BITO- SG // HNW DEMAND SOCIAL ANALYSIS // THE EVERGRANDE
LINKED AUTOCALL p22 IMPACT p34 STORY p38
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SRPInsight
CONTENTS
Contents
Editorial:
Amelie Labbé, Pablo Conde,
Lavanya Nair, Summer Wang,
Marc Wolterink
Production:
Paul Pancham
Marketing: News Europe 4
Monique Kimona Bonnick
Sales:
Reihaneh Fakhari
News Americas 10
If you are interested in having a News Apac 16
similar bespoke report produced
for your organisation, please
contact: Latest: Marex 22
Reihaneh Fakhari
T: +44 (0)20 7779 8220 Feature: Leonteq 24
M: +44 (0)79 8075 6761
E: Reihaneh@structuredretail
products.com
Feature: Morgan Stanley 26
REPRINT POLICY: Q&A: Spectrum Markets 28
SRP’s Reprint Policy: Articles published by
SRP can be sent to sources for reference
and for internal use only (including
intranet posting and internal distribution).
Q&A: CACIB 30
If an article is to be shared with a third
party or re-published on a public website
(i.e. a location on the World Wide Web
that is accessible by anyone with a web
Q&A: Barclays 32
browser and access to the internet),
SRP offers reprints, PDFs of articles or
advertisements, and the licensing to Q&A: SG Private Banking 34
republish any content published on the
SRP website. Prices vary depending
on size, quantity and any additional
requirements. To request authorisation Expert View: US Market Reviews 36
to republish any Q&A, profile or feature
published by SRP, please contact:
info@structuredretailproducts.com.
Expert View: The Evergrande Story 38
Product wrap 40
People moves 43
Front cover image: Casey Horner / Unsplash
www.structuredretailproducts.com 3
NEWS | EUROPE
ESAs ask for ‘experiences,’ further Priips
changes needed
The European Supervisory Authorities (ESAs) have opened a call for evidence
regarding the Priips Regulation.
T
he ESAs are requesting regarding a certain issue or topic. and digital transitions of the continent’s
information from the industry economy. With its strategy for retail
on a range of topics including ‘This might include whether the views investors, the European Commission
the practical application of are based on actual experiences, such wants to offer consumers increased
the existing key information as selling, advising on, or buying Priips, a investment opportunities and stronger
document (KID) such as its use by financial survey of market participants, academic investor protection on the capital markets.
advisors or the use of digital media, research undertaken etc,’ states the
the scope of the packaged retail and report. ‘Manufacturers of products, which The input provided will feed into the ESAs’
insurance-based investment products currently benefit from an exemption to technical advice to the Commission on the
(Priips) Regulation and the degree of produce a KID, such as fund managers, KID for Priips review.
complexity and readability of the KID. are not precluded from sharing evidence
or experience under this call, but should In response to a recent consultation by the
The call for evidence follows the request clarify the context in which they would UK FCA on post-Brexit Priips divergence,
for advice from the European Commission provide comments.’ the country’s association of advisers
of 27 July 2021 in preparation of legislative and investment managers is calling for a
proposals implementing aspects of SCOPE fundamental review of the Priips regime
the retail investment strategy, and Some of the areas of focus in the review rather than a ‘sticking plaster’ approach.
more specifically regarding a review of include the complexity and readability
Regulation (EU) 1286/2014 on packaged of the KID, performance scenarios and Earlier, in September, the European
retail and insurance-based investment past performance, Priips offering a Structured Investment Products
products (Priips). range of options for investment (multi- Association (Eusipa) with other major
option products, or MOPs) as well as financial sector associations requested
In the original mandate, the Commission the alignment between the information a sufficient timeline to implement the
had requested the ESAs a general survey on costs in the Priips KID and other Regulatory Technical Standards (RTS) on
on the use of the KID; a general survey on disclosures requirements in Mifid and IDD. the EU Priips Regulation endorsed by the
the operation of the comprehension alert EC.
in the KID; and a survey of the practical The consultation is closely connected to
application of the rules laid down in the the Commission’s Capital Markets Union The deadline for the ESAs to provide
Priips Regulation. (CMU) Action Plan and its future strategy their advice is 30 April 2022. The call for
for retail investments in Europe. evidence is open until 16 December 2021.
With the new consultation, the ESAs are
collecting further industry feedback ‘on a The CMU Action Plan aims to boost The ESAs also plan to hold a stakeholder
range of other issues’ not identified in the market-based financing in the European event in Q1 2022 before finalising the
mandate provided by the Commission. Union to help chart a return to long- advice to present the findings of the
term growth and to finance the green consultation.
The Commission is asking for an
assessment of the effectiveness of the
administrative sanctions, measures,
and other enforcement actions for
infringements of the Priips Regulation; an
evaluation of the extent to which the Priips
Regulation is adapted to digital media,
Some of the areas of focus in the
and an examination of several questions
concerning the scope of the Priips review include the complexity
Regulation.
and readability of the KID
Some of the questions of the consultation
ask respondents to provide ‘experiences’
4 www.structuredretailproducts.com
SRPInsight
NEWS | EUROPE
VLK, ING debut Refinitiv ESG index
The two Dutch banks have partnered for their first public offer since 2013.
40 Index has been developed by ING “There is an increasing demand for
and tracks the performance of 40 this type of indices and therefore we
companies from the Refinitiv Global developed the Refinitiv ESG Global
Developed Market Index that actively Dividend 40 Index to increase the
invest in and promote environmental, offer of ESG benchmarks for structured
social and governance (ESG) values products. The index combines the
and principles in the running of their use of ESG screens with a selection
businesses. The index is a weighted of global shares with an attractive
index with a constituent’s cap of five dividend yield and diversification
percent. between sectors and regions,” said
Van Baren.
“The starting point in selecting the
underlying index for this product Sustainability is one of the strategic
launch was the desire from our private pillars of VLK and the bank takes ESG
bank to offer a product with 100% factors into consideration in all the
minimum redemption and global equity investment propositions it offers to
exposure. clients. However, within structured
products, it is sometimes quite
“Furthermore, our internal investment challenging to find a suitable ESG
view is that value shares will underlying, said Pronk.
outperform growth shares in the
coming period because of most Covid “The Refinitiv index proposed to us
19 restrictions have been lifted and the by ING did fit into our internal ESG
expected economic recovery,” said guidelines and because it combines
Van Lanschot Kempen (VLK) is Pronk, adding that an index that selects ESG factors with exposure to global
distributing the Index Guarantee Note high dividend paying shares will high dividend paying shares it was a
ESG Global Dividend 21-28 in the normally have a significant exposure to perfect fit for this product launch.”
Netherlands. these value shares.
This is the first time in the eight years
The seven-year, capital-protected The index is the second ING proprietary that VLK and ING have collaborated
note is issued on the paper of ING. index that meets several sustainable for a public offer in the Netherlands.
It is denominated in US dollars and criteria. Over the years, the bank has The last time the two banks worked
participates 100% in the rise of the seen a strong inflow in structured together was in 2013 when ING Index
Refinitiv ESG Global Select Dividend 40 products linked to its Solactive Guarantee Note Eurozone May 13-20
Index, which makes its debut on the SRP Sustainable Europe Low Risk Equity was launched, although there have
database. Index, according to Sander van Baren, been a number of ING products that
director, investment products retail were offered to VLK clients on a private
The main reason for the launch of the solutions, ING Bank. placement basis since.
product is to offer a rollover opportunity
for the VL USD Capped Index Garantie
Note Wereld 19-26, which is currently
trading well above the minimum
redemption (118.45% on 18 October
2021), according to Marcel Pronk
(pictured), director securities marketing
structured products, at Kempen & Co.
Within structured products, it is
“Investors in this product who would sometimes quite challenging to
like to secure their profit can sell it and
rollover in the new note,” said Pronk. find a suitable ESG underlying
The Refinitiv ESG Global Select Dividend
www.structuredretailproducts.com 5
NEWS | EUROPE
Causeway, Barclays track Solactive climate
change play in the UK
The UK brokerage has deployed a Barclays proprietary index for its first deposit plan.
Change deposit is timely ahead of either as a single index, or as part of a
November’s COP26 meeting in Glasgow, basket in combination with S&P 500 or
where world leaders will discuss their Eurostoxx 50. They are wrapped as notes
climate commitments; and also Treasury’s and issued via Goldman Sachs (seven
announcement on the new sustainability products), Morgan Stanley (six), Société
disclosure requirements for some large Générale (five) and BNP Paribas (two).
UK businesses, which will mean they will
be obliged to disclose their firms impact “In terms of strategy, we feel the
on the environment. Climate Change Deposit Plan perfectly
complements our existing offerings,” said
“With this in mind, we feel that ESG Moody. “We will continue to develop
structures will become even more popular innovative structured investment
during 2022, as investors seek climate solutions to our clients which offer value
change investments which offer both to investors, be that in way of returns or
Causeway Securities has launched the positive returns and a positive impact on environmental impact.”
Climate Change Deposit Plan November society and the environment,” said Moody.
2021 in the UK. Although the UK market is dominated
The underlying index is exclusively by the FTSE 100 index, there has been
The six-year capital-protected product licensed to Barclays and has been live an increase in the use of synthetic fixed
offers 200% participation in the Solactive since 16 December 2020. It is derived from dividend indices as issuers look to reduce
Climate Change Europe BTI PR Index, the Solactive right. Climate AVG Target the costs and risks associated with
capped at 36%. It is the company’s first Europe Index, and tracks companies which dividends.
deposit plan, and its first collaboration are aligned with a 2°C global warming
with Barclays Bank, which acts as the scenario through to 2050 and maximises The FTSE 100 Fixed Dividend Yield
deposit taker. investor exposure to companies with Equal Weight Custom Index for example
emission reduction targets. has been used as the underlying for 42
“We have been planning to launch a products in 2021 to date (FY2020: 37
UK deposit product for some time and The index is also designed to enhance products), while the FTSE Custom 100
feedback from our extensive market return profiles by applying additional Synthetic 3.5% Fixed Dividend Index was
research has indicated that UK investors smart beta filters, only including stocks seen in 35 products (FY2020: seven
are keener now more than ever to make with both lower volatility and a consistent products).
more environmentally led decisions in track record of growing dividends.
terms of their portfolio composition,” “We would expect this trend to continue
Chris Moody (pictured), head of UK sales, Causeway has distributed 20 structured and feel there is an ever-increasing
Causeway Securities, told SRP. plans in the UK, according to SRP data. appetite from UK investors to look beyond
The products are linked to the FTSE 100, the FTSE 100,” said Moody.
“Research suggests that investors are no
longer solely interested in the financial
performance of a company, but also the
impact of their investment.”
According to Moody, the deposit format
of this product allows for greater investor
We feel that ESG structures will
comfort, given that each client’s deposit
is protected up to a total of £85,000 by become even more popular
the Financial Services Compensation
Scheme (FSCS). during 2022
The launch of Causeway’s first Climate
6 www.structuredretailproducts.com
SRPInsight
NEWS | EUROPE
Capital-protected funds: the odd one out as
sector prospers
Net assets of publicly offered funds in Belgium reached a record amount
of almost €260 billion in the second quarter of 2021, despite the negative
performance of funds with capital protection.
assets for some time now, according to subscriptions and 40% to price increases
Marc Van de Gucht (pictured), director of the underlying assets.
general, Beama.
At the end of June, the total net assets
“The main reason is that the net of publicly distributed funds in Belgium
repayments of capital-protected funds amounted to a record €259.6 billion
that reach their maturity are no longer (end-March 2021: €246.6m). Net assets of
sufficiently compensated by newly equity funds increased by 8.4% to €87.5
launched capital-protected funds,” said billion during the quarter while within the
Van de Gucht. category of mixed funds, pension savings
funds increased by €900m to €24.2
“Due to the low interest rates, it is billion in the period April – June 2021.
no longer attractive to develop such
products because the fixed-income part “Funds are a suitable long-term product
of the portfolio that provides the capital to deal with inflation,” said Van de Gucht.
protection takes too large a bite out of
the entire portfolio – in other words, “See for example the long-term returns
the scope for derivative products has of pension savings funds that can
become too small.” reassure pension savers that they can
maintain their future purchasing power.”
KBC’s Perspective Global 95 USD 2, with
sales of €42m during the subscription Since the end of 2019 (pre-Covid-19)
Capital-protected structured funds in period, is the best-selling structured fund and mid-2021, the Belgian fund market
Belgium had net assets of €2.9 billion at in Belgium in 2021, while of the maturing increased by €40 billion, according to
the end of June 2021, down by 8.7% from funds, E-commerce 90 USD 3, which Van de Gucht.
the previous quarter, according to figures sold €13.54m at inception, registered the
released by the Belgian Asset Managers best performance with a capital return of “Covid-19 had a strong impact during
Association (Beama) on 15 October. 160% after 5.75-years (8.55% pa). March/April 2020, but by the end of
2020 all price losses caused by the
Since 2011, when assets stood at €19.2 The Belgian fund sector as a whole pandemic had been recovered. In
billion, capital-protected funds have experienced a 5.3% increase quarter-on- other words, the Belgian fund sector
shown a downwards spiral, a trend quarter during Q2 2021. Approximately has assimilated the Covid-19 pandemic
reflected in issuance and sales figures 60% of the rise can be attributed to net relatively quickly,” Van de Gucht said.
for structured funds recorded in the SRP
Belgium database.
Back then, 138 structured funds, from
seven different providers (Axa, Bpost,
Centea, Dexia, Fortis, ING and KBC),
collected a combined volume of €2.6
billion. By contrast, in 2021 to date there
have been just eight new funds worth
Funds are a suitable long-term
€215m, with KBC the sole provider.
product to deal with inflation
Capital-protected funds have been
phasing out their commercialised
www.structuredretailproducts.com 7
NEWS | EUROPE
Vontobel delivers ESG-themes on correlated
stocks in Italy
The structured products specialist is targeting Italian investors with a new range
of certificates linked to ESG-themed sector baskets.
Although the underlying baskets are organisations such as the United
linked to eight different sectors, the Nations Global Compact for corporate
structure of the certificates is the same. sustainability.
They are issued on the same date
with the same maturity and the same “We are committed to economic,
characteristics. The certificates have environmental and social sustainability.
a step-down autocall trigger, deep
barriers of up to 50%, and memory “If the product issuer is sustainable and
coupons of between 9.84% and 17.76% the underlying is considered sustainable
pa. The latter is offered via Memory by our ESG Competence Center,
Cash Collect (Express) Certificate on then the final product is considered a
a basket comprising four shares from sustainable product according to our ‘Act
the renewable energy sector (Ballard ESG’ methodology,” said Fiaschini.
Power Systems, Nordex, Siemens
Energy, and Vestas). The story of ‘Act ESG’ goes back to
2019 when Vontobel conducted a
Vontobel has launched eight new survey across 4,600 investors from 14
Memory Cash Collect (Express) different markets. Sixty-four percent
Certificates with the ‘Act ESG’ logo of respondents said they did not
in Italy. The certificates are linked to receive enough information about ESG
thematic baskets comprised of stocks approaches. Amongst them only 17% had
that are correlated – ranging from the All products are been offered concrete opportunities to
gaming sector to the construction sector. save and invest in a sustainable manner.
linked to worst-
“We wanted to offer investors the “It became pretty clear that there was
option to invest in an ESG-related of sector baskets a lack of support and this was holding
theme via structured products,” said investors back, but at the same time
Jacopo Fiaschini (pictured), head of of three or four we saw an interest and a trend towards
flow products distribution Italy, Vontobel sustainable investments,” said Fiaschini.
Digital Investing. stocks that are
Vontobel then started taking the initiative
Vontobel created sector baskets for the correlated to speak about the challenges ahead but
certificates that are entirely composed also to show the historic transformation
of stocks of companies considered to process that is creating unique
be sustainable by its ESG Competence opportunities for investors too.
Center in Switzerland.
“All products are linked to worst-of sector “Given this ESG knowledge gap, we
“The goal of the ESG Competence baskets of three or four stocks that wanted, and we still want to explain what
Center’s sustainability analysis is to are correlated. This is what we want to investors need to know to play an active
identify companies that beat their deliver to our Italian investors because role in sustainable transformation for our
competitors in an active sustainability low correlation is a risk component,” said economy,” said Fiaschini.
approach and offer the best sustainability Fiaschini.
performance in their industry. “The ‘Act ESG’ logo signals where the
The aim of the certificates is to promote sustainable investing discussion is.
“This is the so-called ‘best in class’ Vontobel as an issuer of sustainable You can see it on our website, in our
approach,” said Fiaschini - all certificates solutions. The company has been publications…it is a symbol that is meant
are marked with Vontobel’s ‘Act ESG’ involved in sustainability since the to guide investors on our platforms to
logo “to make them easily recognisable”. 1990s and is a member of numerous identify relevant content.”
8 www.structuredretailproducts.com
SRPInsight
NEWS | EUROPE
BBVA QIS deploys cyber play Morningstar
introduces EU
BBVA has added the Solactive BBVA
Cybersecurity Index to its range of
“Hyperconnectivity is an already visible
future, but not without threats,” he said.
climate indexes
quantitative investment strategies (QIS). “Companies, governments and individuals
are constantly exposed to cyber-attacks,
The new technology index is comprised and the cost is growing steadily. The
of equity stocks of companies helping Solactive BBVA Cybersecurity index
to create a trusted and safe cyberspace strategy is based on the strong growth
companies in the frontline of digital in the demand for cybersecurity services
security; data protection and cyber-risk expected in the near future, due to the
insurance, as well as those creating increasing frequency and sophistication of
secure online transaction platforms and cyberattacks, regulatory pressure across the
heeding the call for cyber defense, thanks board and the IOT expansion, which calls
to the low-latency network infrastructure for another added level of cybersecurity.”
and components.
The top components of the index include
The Solactive BBVA Cybersecurity Oracle (5.54%), Microsoft (5.11%), Adyen
index is part of BBVA QIS’ strategy (4.39%), Paypal (4.22%), Lockheed Martin Morningstar Indexes has rolled out
to offer its clients exposure to one (4.18%), Chubb (3.63%), Fiserv (3.57%), the Morningstar EU Climate Indexes
of the most relevant megatrends - Analog Devices (3.53%), Fidelity National to help investors progress toward
technological disruption - and is a Information Services (3.44%), and Palo meeting EU Climate Transition
fully complementary strategy to the Alto Networks (3.43%). Benchmarks (CTB) and Paris-Aligned
recently launched Solactive BBVA Next Benchmarks (PAB) requirements.
Generation Networks index, according The new underlying is available now for
to Javier Enrile Mora-Figueroa, head of direct investment and distribution through This new climate index series from
QIS sales at BBVA. structured products. Morningstar allows investors to
target companies within a broad
market index that are on track for
decarbonisation in line with Paris
accord targets, while minimising
Unicredit joins Spire multi-
tracking error against the parent
index. The series combines
Morningstar core benchmarks with
dealer platform carbon emissions data and Carbon
Risk Ratings from Sustainalytics, a
Morningstar company and leading
The Spire programme allows repackaged Unicredit is seeking to adapt and global provider of ESG research,
notes arranged by the platform’s dealer- upgrade its product platform ‘in line with ratings and data.
members to be issued in standardised the evolving needs and preferences
formats. Investors can gain exposure to a of institutional investors, particularly This new climate index suite from
variety of underlying collateral assets and those in the European pension and Morningstar adds to its growing
customisable payoffs. insurance sector’, according to Guido investment in market indexes and
Filippa, global head of institutional data to support global investors.
The platform has transacted in excess distribution and private investor products
In September, Morningstar
of €38 billion-equivalent of repackaged at Unicredit.
announced the acquisition
securities issued to major UK, European
of Moorgate Benchmarks, a
and Asian institutional investors to date. The Spire platform was established by
Europe-based global provider
BNP Paribas, Citigroup, Credit Suisse
‘Complementary to our existing suite of and J.P. Morgan in May 2017. Barclays, of index design, calculation, and
repackaging solutions, we see the Spire Goldman Sachs, Crédit Agricole CIB and administration, appointing Moorgate
platform providing additional choice and Morgan Stanley joined in 2018. Natixis, Benchmarks CEO Tobias Sproehnle
benefits that address some of the needs BofA Securities Europe SA, Deutsche as head of Morningstar Indexes in
of our institutional client franchise,’ said Bank, HSBC, Société Générale and Europe reporting to Ron Bundy,
Amit Sharma, Unicredit’s global head of NatWest Markets joined in 2019. Nomura president of Morningstar Indexes.
markets structuring & solutions. joined in 2021.
www.structuredretailproducts.com 9
NEWS: AMERICAS
US insurers ride the indexed annuity wave as
FIA demand intensifies
The Secure Retirement Institute (SRI) has recorded a 14% increase in the sales of
fixed indexed annuities during the first nine months of 2021 with figures totalling
US$47.1 billion, compared with the same period of 2020.
date funds for the defined contribution by illustration, but we are willing to potentially
embedding a fixed index annuity structure, partner with index sponsors that develop
according to Tom Haines (pictured), head of more sophisticated and innovative indices
index solutions at Annexus. if they are sincerely seeking to implement
the latest academic advancements using
“We also launched a Rila product last robust methods in order to improve the
year called the Nationwide Defined likelihood that the index can perform on a
Protection annuity, which is one of the go-forward basis,” he said.
first to use a floored structure in the Rila
market to provide smart beta exposure. In terms of thematic plays, it is questionable
What we think is that the offering provides if this area is going to be as concentrated
opportunities to define the level of risk, and sector based as apart from ESG, it
which is the floor, while providing upside to is rare that other thematics that would
a well diverse group of smart beta indices,” resonate with the US retirement market,
T
said Haines. according to Haines.
he renewed interest in FIAs The shift towards index-based solutions “It will be interesting to see this play
comes as the interest rate is driven by the fact that these products out. I do think people will continue to
environment slowly recovers provide better hedging efficiency for its use strategies that look at new methods
and lower volatility is re- insurance company partners that results in and computing power to drive better
directing investor attention better outcomes for clients. outcomes,” he said, stressing the
towards such products. importance of bringing lifetime income
solutions within the defined contribution
As the attention towards indexed annuities market in the 401k market and that such
heats up, several market players are toying concepts that utilize lifetime income
with custom and proprietary strategies to solutions raises the need for having an
churn out newer alternatives to the market. Some index indexed annuity within a portfolio.
Independent FIA designer Annexus
recently introduced an FIA in partnership sponsors try to “Considering where markets are right
now, the S&P 500 is back at all-time highs,
with North American Life which tracks a interest rates are below 2% while the
Goldman Sachs managed prop index. over engineer expected returns for major US-based asset
classes is dim. So, I think it really reiterated
To respond to the increasing demand, the
firm has placed a higher focus on index the design that clients need to have alternatives for
their portfolio in 2022.”
driven insurance products which can range
from indexed annuities as well as the According to SRI, FIA sales grew by 30%
registered market with the broker-dealers in the second quarter of 2021 to US$17.1
in conjunction with its partners. However, as the scope of how billion, marking the highest quarterly sales
sophisticated these products can become in two years.
The indexed universal life market is also is further explored, the underying index
a priority for Annexus as well taking well itself may fall victim to unnecessary and SRI also noted that registered index-linked
developed index strategies with upside decorative measures, according to Haines. annuity (Rila) sales were US$9.2 billion,
participation in a life marketplace. The firm up 47% from third quarter of 2020. For
introduced a retirement solutions division “Some index sponsors try to over engineer the first three quarters of 2021, Rila sales
to employ a lifetime income builder, which the design to make the index look were US$28.4 billion, representing an 81%
aims to drive better outcomes in target sophisticated in order to achieve a better increase from the prior year.
10 www.structuredretailproducts.comSRPInsight
NEWS: AMERICAS
SEC slaps enforcement action on oil ETP for
neglicence despite no investor loss
The US regulator has charged the United States Oil (USO) Fund, an exchange-
traded product (ETP), as well as its general partner United States Commodity
Funds (USCF) for misleading statements about limitations imposed by its sole
futures commission merchant and broker.
created shares in oil future contracts. counsel at law firm Mayer Brown, this
This brought about the risk that USO enforcement by the SEC is different from
would not be able to meet its stated other cases involving ETPs because
investment goal and the order states no losses by retail investors have been
that the fund did not fully disclose the mentioned.
character and nature of the limitation
until one month after the limit was first “The fund was out of shares which led to
imposed. USO filing a new registration statement.
So, there were no offers of sales during
On 20 April 2020, USO filed a Form the whole time this was going on and
8-K announcing that it anticipated investors were just holding for the time
exhausting its existing inventory of being,” he said.
available shares, and separately filed a
registration statement on Form S-3 with In terms of securities laws, liability comes
the SEC. This registration statement in connection with the offer and sale of
would then go on to be amended a security, but there were no securities
several times and finally declared to sell until the corrected registration
effective in June of 2020. statement went effective, said Bergman.
The SEC’s order also found that “That’s why I believe the SEC had
both USO and USCF have violated a to pinpoint section 17, which was a
negligence-based anti-fraud provision negligence matter. They could have
(Section 17) of the federal securities gone after them under other avenues
code. Neither party admitted to nor if there had been damages. This is a
Both the USO and USCF have agreed to denied the allegations made by the cautionary tale to others as when you
pay US$2.5m in penalties to settle cases watchdog and agreed to cease-and- see the SEC going after somebody
by the SEC and Commodity Futures desist orders and to pay the penalty, where there were no offers and sales
Trading Commission (CFTC). According which will be offset by up to US$1.25m or no allegations of damage or investor
to the SEC’s order, USO’s investment paid in CFTC’s parallel proceeding. harm at all, that signals to them that they
objective was to track any changes in According to Brad Berman (pictured), must take extra precautions.”
the spot price of oil, as measured by the
changes in prices of certain oil futures
contracts.
However, oil market spiralled into turmoil
during the market crash of April 2020
and the near-month futures contract
closed at a negative price. The fund’s
The fund was out of shares
sole futures broker then told USO it
would not execute any new oil futures which led to USO filing a new
positions for it.
As a result of this limitation, USO was
registration statement
restricted from investing the proceeds
generated by the future sales of newly
www.structuredretailproducts.com 11NEWS: AMERICAS
US insurance regulator concerned with
Rila growth
The Federal Insurance Office (FIO), a division of the US Treasury Department, is now
eyeing the swift traction of Rilas in the market after record sales over the past year
have prompted much discussion over their trajectory.
and trading expertise in options by 28% in the second quarter to total
strategies,” said Toland. US$15.4 billion. Year-to- date, FIA sales
stand at US$28.9 billion, reflecting a slight
If the options strategy itself were to increase of two percent from the same
fail, the insurer is on the hook for the period of 2020.
promise to the policyholder, regardless
which structure it falls within, which Fixed annuity sales jumped by 27% to
distinguishes these products from US$35.1 billion in the quarter. Year-to-date,
structured notes. total fixed annuity sales are at US$66.2
billion, 15% above the first half of 2020.
“Rilas are going strong and the biggest
risks for these products come from The growth in the Rila market over the
either a dramatic change in economic past several years has been driven
conditions that would make popular by a combination of two factors:
Rila structures less attractive or an current economic conditions - strong
unexpected regulatory change.” equity market and low interest rates,
and expanding market participants,
In terms of potential interventions that according to Todd Giesing, SRI assistant
could be made by the FIO, matters are still vice president and head of annuity
unclear as the FIO has not taken any action research.
In an annual report issued by the FIO in previously on concerns it has voiced.
October 2021, the agency has expressed “Our research shows consumers’ desire
closely monitoring registered index- According to the Secure Retirement for protected investment growth remains
linked annuities (Rilas) detailing that Institute (SRI), Rila sales in the US increased strong and Rilas are providing the most
while they represent a small portion of to a record level of US$10.1 billion in the attractive option in a historically low
variable annuity sales, life insurers have second quarter of 2021, a 122% jump from interest rate environment,” he said.
‘significantly increased Rila sales over the the same period a year prior. “Over the past five years, Rila sales have
past six quarters, particularly as compared quadrupled from $6.3 billion in 2016 to
to other variable annuity products’. During the first half of 2021, Rila sales $24.1 billion. Several carriers, recognizing
stood at US$19.3 billion, 105% higher this market opportunity, have entered the
‘Investors driving Rila sales growth appear than the prior year. market. In 2016, there were just a handful
to be interested in capturing recent of companies in the Rila market. Today,
gains in equity markets and acquiring Fixed indexed annuity sales also grew there are 15 carriers offering Rilas.”
protection-focused products generally.
Rila sales appear likely to continue
to grow in light of ongoing life sector
restructuring. FIO will continue to monitor
Rila-related issues,’ said the report.
According to Tamiko Toland (pictured),
annuities director at Cannex, it is unclear
Investors driving Rila sales growth
how intimately the FIO understands how
insurers manage the risk on fixed indexed
appear to be interested in capturing
annuities (FIAs) or Rilas.
recent gains in equity markets
“One thing they share in common is the
sophisticated use of financial engineering
12 www.structuredretailproducts.comSRPInsight
NEWS: AMERICAS
BNP Paribas to fund Latam Cboe and
non-profit via structured note MSCI expand
partnership
sale proceeds Cboe Global Markets and MSCI
have signed a licensing agreement
that extends and broadens their
organisation developing programmes strategic relationship.
to alleviate poverty.
The agreement builds on the
The donations raised from the collaboration between the two
campaign will specifically benefit one companies and extends Cboe’s
of the organisation’s projects at La rights to offer options trading on
Comunidad de Niños Sagrada Familia, MSCI global indices through 2031.
a large school, orphanage, and medical The agreement also expands Cboe’s
clinic in Peru, housing over 1,000 and MSCI’s relationship, creating
children. opportunities for the companies
to work together to pursue other
BNP Paribas will donate to The strategic initiatives across capital
Forgotten International a portion of the markets, and combine their
bank’s proceeds from structured notes complementary strengths and visions
BNP Paribas USA has launched a sales. to help drive future innovation for
philanthropic campaign to fund an market participants globally.
independent non-profit organisation The donation will fund the cost of a
with donations from structured notes child’s daily meals for children housed The two companies have
purchases. at the orphanage for every $10,000 of collaborated to offer options trading
structured products notes purchased on MSCI global indices for many
The French bank’s new structured by the bank’s clients, said Nathalie years. Under the agreement, initially
notes campaign will help The Forgotten Texier-Guillot (pictured), BNP Paribas signed in 2014, Cboe will continue
International, an independent non-profit head of equity sales US. to have the rights in the US to
develop and list index options on
the following six MSCI indices: the
MSCI EAFE Index (MXEA), MSCI
Halo raises over US$100m in Emerging Markets Index (MXEF),
MSCI All Country World Index, MSCI
series C funding
USA Index, MSCI World Index and
the MSCI ACWI ex-USA Index.
In addition, the agreement enables
Multi-issuer platforms continue to gain investing’, according to Biju Kulathakal, Cboe to offer index options,
traction across markets as well as support co-founder & CEO of Halo. subject to regulatory approval, on
from independent investors as suggested four additional MSCI ESG indices:
by the latest funding rounds. Halo has expanded its offering over the the MSCI Emerging Markets ESG
past year with the addition of buffered Leaders Index, MSCI EAFE ESG
The US structured notes platform has ETFs and indexed annuities to its platform Leaders Index, MSCI USA ESG
announced a collective investment – the US platform has also onboarded Leaders Index and the MSCI World
backed by Owl Capital which includes more than 40 global banks and carriers. ESG Leaders Index.
the Mubadala-backed US$1 billion fund
managed by Abu Dhabi Catalyst Partners, Abu Dhabi Catalyst Partners was Cboe is the only US exchange that
along with existing investors Allianz Life established in 2019 as a joint venture offers options trading on MSCI
Ventures and William Blair. between Mubadala Investment Company indices. Cboe offers a series of
and Falcon Edge Capital, to establish a BuyWrite and PutWrite strategy
The capital will be deployed ‘to invest strategic presence at Abu Dhabi benchmark indices based on
in new markets, widen its distribution the MSCI EAFE Index and MSCI
channels, and expand into new asset Global Market (ADGM). Halo aims to open Emerging Markets Index.
classes while further disrupting protective an office at ADGM.
www.structuredretailproducts.com 13NEWS: AMERICAS
NBC bolsters dividend investing as capital at
risk displaces protection
The Canadian bank is expanding the pool of underlyings offered as its issuance of
structured products returns to pre-pandemic levels.
trending upwards, so we have witnessed “There’s a strong market sentiment
more autocallable notes being called that dividends from banks are going to
than in previous years.” increase and investing in an AR index
provides investors with exposure to
More people have begun to see that the dividend,” said Marquis. “I think it’s
structured products offer a very powerful been quite popular, but the transition to
way of generating alternative income AR has been executed very carefully.
with some downside protection. At NBC, we started with only one niche
sectorial index. The idea was to attract
“The structured products team at NBC the attention to the novelty and give us
has been quite active and achieved a time to properly train our clients.”
record number of notes and notional
value,” said Marquis. “A main priority During the third quarter, NBC issued a
of our clients is income generation large volume of structured products to
without taking too much risk, which is Solactive underlyings worth a collective
where structured notes find their niche US$243m accounting for almost 160
in answering those needs. We offer products. Most of the products are linked
multiple underlyings to cater to the to the banking sector with the Solactive
diverse needs of our clients.” Canada Bank 30 AR index and Solactive
United States Big Banks AR index
SRP caught up with Vincent Marquis The significant uptick in structured dominating sales.
(pictured), managing director at National products tied to Solactive has not gone
Bank of Canada (NBC) to discuss the unnoticed. The German index provider To support the shift, the bank has
bank’s structured product activity this offers broad market indices, but their produced many training documents, put
year amid a rapidly changing landscape, sectoral indices have been more on webinars, and organised one-on-one
which is garnering international popular. discussions with its clients when they
attention in the form of German index began showing interest upon the launch
provider Solactive. Dividends have been more stable in of these products.
Canada historically, and sectors such
Marquis speaks about the popularity of as banking have been one of the most “We then gradually rolled out other AR
the dividend banking sector, the bank’s popular adjusted return indices used in indices linked to sectors that are even
differentiating strategy in the Canadian the Canadian market. more popular,” said Marquis.
structured products market, as well
as the growing trend of non-principal
protected note issuance which is now
displacing guaranteed investment
certificate (GIC) activity.
As reported in early September,
structured products issuance at NBC has
been strong this year.
A main priority of our clients
“While the very early stage of the is income generation without
pandemic was challenging in 2020, it
has since been a very good period for
structured notes, especially income
taking too much risk
notes and auto callable coupon notes,”
said Marquis. “We have seen the market
14 www.structuredretailproducts.comSRPInsight
NEWS: AMERICAS
Virtu’s RFQ-hub launches SIMON adds
electronic workflow for partner in push
for marketplace
swaptions on CDS expansion
voice and manual dominated swaptions
on CDS workflow, a project which
required the onboarding of sell side
counterparties and technology integration
with Union’s system architecture.
Using the RFQ-hub platform, swaptions
traders can now leverage electronic
request for quote workflows to put
multiple liquidity providers in competition
for efficient and transparent price
discovery, automated audit trail and
integration with risk management and
other post-trade systems or processing. The US multi-dealer platform has
Virtu Financial has launches an electronic
partnered with enterprise software
workflow tool for swaptions on CDS in German-based Union Investment, a
solutions provider +Subscribe to
its RFQ-hub, the firm’s bilateral multi- European asset manager with €425
launch an alternative investment
asset and multi-dealer request for quote billion AUM, negotiated the first-fully
fund marketplace, which would
platform. electronic swaptions on CDS RFQ
via Virtu’s RFQ-hub in H1 2021, which deliver a full suite of investment
Union’s and Virtu’s RFQ-hub team subsequently resulted in an OTC trade offerings from established asset
collaborated to automate the traditional executed in that instrument. managers.
The marketplace will be powered by
+Subscribe’s electronic subscription
document technology and strives to
Goldman offers SPAC-linked allow financial advisors to centralise
their activity across direct fund and
structured notes
feeder fund investments.
The fund marketplace aims
to equip clients with product
analytics, education, and lifecycle
Goldman Sachs Group has sold ‘a few It is understood Goldman does not management for both registered
structured notes’ to clients seeking charge a management fee for the and private funds. It will also be
to gain geared exposure to special notes but offers investors financing to available to more than 100,000
purpose acquisition companies (SPACs), participate in the product and keeps financial professionals from 50
to capitalise on increasing activity on some of the returns on the SPAC stocks, wealth management firms that
the market trend, SRP has learnt. depending on how well they perform. already have access to the Simon
The new SPAC notes are being offered platform.
The two-year SPAC-linked structured by a desk in the sales and trading arm of
notes offer a payout referenced to Goldman Sachs’ global markets division, +Subscribe’s technology is
a basket of discounted SPACs and rather than investment banking unit. employed on a global scale by more
have been issued under the Rule 144A than 5,000 institutional investors,
which provide many structured note The SPAC market continues to grow at 1,200 private funds, and 300 service
offerings with exemption from the a speed – its size reached US$137.4 providers such as fund formation law
Financial Industry Regulatory Authority’s billion at the end of October. firms, fund administrators, and asset
(Finra) Rule 5123, relating to private custodians.
placements and the requirement for Goldman Sachs declined to comment
registered documentation. on the details of the product.
www.structuredretailproducts.com 15NEWS | APAC
China Minsheng Bank cashes in on first QIS
ESG play via structured deposits
Market players in South Korea reflect on the stagnating issuance of equity-
linked securities (ELS) linked to ESG indices since their debut in April.
T
he new custom index, the ‘Minsheng Bank ESG Index Series’ to be hedge providers for onshore and offshore
Minsheng ESG Overseas marketed via structured deposits, which assets, respectively. All three ESG indices
Allocation Index (民生银行海外 shall be principal-protected at Chinese are already live.
ESG资产轮动指数), known as banks as required by regulations, to
‘MSMEGA’, is administered and capture new opportunities. The MSMEGA and MSTRAESG are the first
hedged by Société Générale. ESG-themed global multi-asset strategy
“ESG theme is relatively new investment indices independently developed by a
Following the first strike on 10 September, concepts for Chinese customers. As a Chinese commercial bank, as other ESG
China Minsheng Bank (CMBC) has issued result, we need to make more promotion indices offered by Chinese banks refer to
12 tranches of the structured deposits with efforts,” said the CMBC official. only one market or a single asset class.
a bull call spread, five of which generated
a US$28.3m notional while the remaining Next in bank’s pipeline was the UNDERLYING INDEX
are CNY-denominated. Minsheng ESG Global Allocation Index ( The MSMEGA covers a total of six stock
民生银行全球ESG资产轮动指数), known indices that meet ESG characteristics as
“ESG investment is gradually being as MSTARESG. The index constituents well as government bonds in Japan, US
favoured by mainstream overseas asset include another new proprietary and Europe including 10-year US treasury,
management institutions in the overseas ESG index offering Chinese banking long-term German treasury, 10-year Japan
market,” a CMBC spokesperson told SRP. exposure, the 民生银行行业龙头ESG treasury, S&P 500 ESG Index, Eurostoxx
“In China, the ‘carbon neutrality’ policy 指数, in addition to the S&P 500 ESG 50 ESG Index and Nikkei 225 Index.
has received widespread attention since Index and Eurostoxx 50 ESG Index seen
its introduction in 2020, but capital- in MSMEGA. The rules-based momentum trading
guaranteed investment products featuring strategy aims to generate excess returns
ESG theme are uncommon in the market.” The structured deposits on the by increasing the weight of the relatively
MSTRAESG is also based on a bull call better-performing constituent while
The commercial bank has developed the spread with Citic Securities acting as decreasing the other in the same country.
Bank of China International goes live with Horizon with Structured
Products RFQ module
Electronic trading solutions and algorithmic technology, Horizon Software, has announced that the Bank of China International
(BOCI) has chosen to go-live with its Structured Products RFQ Solution to maximise efficiency and deliver automated solutions
to their clients.
The aim of this project is to provide BOCI with a system to receive, handle and monitor structured product RFQ requests that
come in from clients via both email and messaging systems. As a result, the bank will be able to monitor the different RFQs, to
price those RFQ requests using BOCI’s Numerix pricer, generate responses, and remove manual actions from sales traders.
By deploying the RFQ module, BOCI will be able to handle a larger volume of RFQs on vanilla ELN, accumulators, and range
accrual notes and help to reduce the time required to respond to the individual needs of clients, according to Emmanuel Faure,
head of sales Apac at Horizon Software.
Headquartered in Hong Kong with more than 50 subsidiaries around the world, BOCI provides clients with a full range of
investment banking products and services in both mainland China and overseas capital markets, including share issuance,
merger and acquisition, bond issuance, fixed income, private banking, private equity, global commodities, asset management,
equity derivatives, and leveraged and structured financing.
16 www.structuredretailproducts.comSRPInsight
NEWS | APAC
Hang Seng Bank debuts customised ELI with
US equity underlyings
In a first for the Hong Kong market, Hang Seng Bank has introduced equity-
linked investments (ELI) linked to US stocks for retail investors with a minimum
ticket of HK$100,000 (US$12,861).
to expand our range of wealth awards at the SRP Apac Awards 2021
management product offerings and on the back of last year’s activities.
further strengthen our market analysis
capabilities. The 10 highest-selling ELIs last week
were linked to the performance of
‘The launch of new subscription service single stocks including Meituan,
will expand the range of choices Geely, Alibaba and Xiaomi, as well
available to retail customers with more stock baskets covering AIA, China
sophisticated investment needs who Merchants Bank, BYD, Bank of China
are seeking to widen their investment (Hong Kong), Hong Kong Exchange
scope and further diversifying their and Clearings, Sino Biopharmaceutical,
investment portfolios.’ China Life, Xiaomi or Alibaba,
according to the bank.
Earlier this month, the Hong Kong-
headquartered bank rolled out its US There are 925, 1,142 and 1,208 ELIs
securities trading mobile service to issued by Hang Seng Bank in the
‘make it easier for customers to take first, second and third quarter of
advantage of investment opportunities 2021, respectively, SRP data shows.
in the US stock market’. Majority of these reverse convertible
or bonus enhancement notes are not
As a leading ELI issuer in Hong capital-guaranteed, although the
Kong SAR, Hang Seng Bank has issuer offers ELI with 70% to 99.9%
marketed over 4,000 offerings in the capital protection.
first half of 2021 with a 30% increase in
sales in 2020 compared with 2019, as In 2020, ELI accounted for 57.8% of
SRP reported. the structured product market in Hong
The new customisation tool, which Kong SAR, or HK$1.6 trillion, which
went live on 18 October, allows ELI The underlying expansion is the includes equity-linked accumulators
investors to select their preferred issuer’s response to the surge in and decumulators, according to the
US stock underlyings, as well as the demand for US equity underlyings latest survey from the Securities and
investment period from one to 11 despite the dominance of Hong Kong Futures Commission (SFC) and the
months, strike price and airbag level. stocks - Hang Seng Bank won three Hong Kong Monetary Authority (HKMA).
The subscription is available in seven
currencies.
In the meantime, the Hong Kong-based
bank will also issue ELIs tied to US
stocks daily.
‘In fast-moving market conditions,
We are continuing to
investors are looking for more flexibility
in building their investment strategies,’
said Rosita Lee (pictured), head of
expand our range of wealth
investment products and advisory
business at Hang Seng Bank. ‘To management product offerings
meet the increasingly diverse needs
of customers, we are continuing
www.structuredretailproducts.com 17NEWS | APAC
HK equity bolsters Malaysia structured
warrant market
The country’s structured warrants market saw a wider use of Hong Kong
equity stocks during the last quarter.
‘The dematerialisation of structured The FTSE Bursa Malaysia KLCI Index,
warrants through a robust and automated Hong Kong-listed BYD, S&P 500 and
distributed ledger technology will iShares FTSE A50 China Index ETF (HKD)
contribute to a more transparent, secure, were tracked by four new warrants each,
economical, and most importantly, SRP data shows.
effective marketplace for all,’ said Datuk
Muhamad Umar Swift (pictured), CEO of In contrast, Malaysian stocks Genting
Bursa Malaysia. Berhad and Top Gloves were part of the
top five underlying assets in Q3 20 in
STRUCTURED WARRANTS Macquarie’s issuance, although the Hang
The third quarter saw a significantly wider Seng Index remained the most popular
use of Hong Kong equities in structured choice featuring across 18 products.
warrants in Malaysia, which feature a tenor
of less than one year. Along with Maybank, AmBank continued
to focus on Malaysian equities - 59 new
Macquarie Capital Securities (Malaysia) listings linked to a total of 56 stock names
remains well ahead as the top issuer in including Genting Berhad, Hartalega and
The number of new structured warrants the market with 141 new SWs in Q3 21, or a Dagang NeXchange.
(SWs) listed on Bursa Malaysia has 35.5% market share, followed by Malaysia’s
increased by 16.8% to 396 in Q3 21 AmBank (59), Kenanga Investment Bank Kenanga Investment Bank in July used for
quarter-on-quarter (QoQ) – the number (56), CIMB Bank (52), Maybank (48) and the first time the Hang Seng Index – the
of products listed stood at 1,088 in the RHB Investment Bank (41). index was first introduced to Malaysia’s
first nine months, up 22% year-on-year structured warrant market by Macquarie in
(YoY) driven by ‘easy access to foreign The Australian securities house saw its early 2017, SRP data shows.
underlying assets’. quarterly issuance reach its peak this
year – this quarter’s issuance comprised The issuer eventually marketed six of HSI-
Listing and issuer services revenue at 108 call warrants and 33 put warrants, SRP linked warrants with a tenor of six months
the exchange increased by 10.9% to data shows. The warrants featured the in Q3 21, making Hang Seng Index the
MYR17.9m QoQ ‘mainly due to higher underlying assets of Hang Seng Index and most utilised underlying asset followed
initial listing fees earned from IPOs and Hang Seng Tech Index, which were tracked by Hong Seng Consolidated, a Malaysia-
structured warrant listings,’ according to by 18 and 12 products, respectively. based investment holding company.
Bursa Malaysia’s Q3 21 earnings release.
Macquarie, which entered Malaysia’s CIMB Bank, on its part, has been issuing
The exchange posted a revenue growth structured warrant market back in 2014, Hang Seng Index warrants since April
of MYR52.3m during the first three is currently the sole issuer of Hang Seng 2019 – 12 new listings on the index were
quarters of this year, up 30.5% YoY, while Tech Index warrants. added in Q3 21, SRP data shows.
operating revenue rose by 6.5% to
MYR590m YoY, which was partly attributed Meituan Dianping, a Chinese shopping RHB Investment Bank in September
to the increased SW listings. platform listed in Hong Kong SAR, rolled over 10 new structured warrants
also stood out as one of the preferred on Chinese companies listed in Hong
In September, the exchange embarked underlyings - its shares were tracked by Kong with renewable energy as the
on a blockchain-powered proof-of- three call and two put warrants during main theme, including China Longyuan
concept to reduce the manual work the quarter. This Hong Kong stock was Power Group, Xinyi Solar Holdings and
for creating and managing securities first seen in the Malaysian SW market Ganfeng Lithium.
certificates with an initial emphasis on in September 2020 with RHB Bank as
SWs by leveraging ‘Daml smart contracts’ the issuer – the Meituan Dianping also The Malaysian bank plans to list up to a
from Digital Asset and a distributed appeared on a call warrant marketed by total of 60 Hong Kong stock warrants from
ledger platform from VMware. the bank in March. multiple sectors by the end of the year.
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