Natixis US: Investors' income needs drive product design, 05 March 2015

Natixis US: Investors' income needs drive product design

Samuel Rosenberg joined Natixis CIB Americas in the summer of 2014 as head of equity derivatives sales, Americas and was charged with driving its client franchise in the region. SRP spoke to him about the French bank's in-depth refocusing of its equity derivatives to service investors across the Americas and how its cross-asset investment solutions, financial engineering, flow sales and fund solutions will be organised to achieve the Natixis's ambitions.

What is your main mandate as head of equity derivatives sales, Americas at Natixis?
I'm going to be focused on building equity derivatives in the Americas, which includes creating a strong product platform. We have a very strong trading structure and capabilities as well as the robust risk limits and back office systems. However, there are a number of things we need to develop in terms of hedging and investment products. One of the areas where we are going to invest is in the development of our proprietary index platform to be able to tap into a growing trend in the structured products market around providing access to risk-premia for institutional and retail investors. We have the quantitative expertise and capabilities already in Europe and we want to replicate that and adapt it to the specificities of the US market, mostly around the nature and characteristics of the strategy, currency denomination, and the underlying assets. The challenge is to build a product offering to cater to a wide investing audience that wants to engage with this kind of solution.

What was missing on Natixis's platform when you joined? Are you planning to add new clients and expand your distribution capabilities in the region?
Natixis has traditionally catered to a certain type of investor, but in equity derivatives we want to increase our coverage of institutional investors, including insurance companies, asset managers and pension funds. That is no small task as you need time to implement Isda's provisions and tap into legal resources. We want to offer that to our clients. It's important from the issuer side, but also from an investor perspective, that we offer a comprehensive service.

We will be catering to institutional investors directly for hedging, financing and investment solutions and servicing retail investors via our distribution partners (private banks, broker dealers, RIAs, wealth managers) with a range of cross-asset structured notes that are issued under our US medium-term note programme.

How important is brand recognition to succeed in the US market? Are investors in the US familiar with the Natixis brand?
The third area of focus is increasing the visibility of the brand. Natixis is a great bank and it has a lot of room for growth in its investment banking division because of its expertise in equity derivatives. Natixis is better known for its retail activity in France via its parent company Groupe BPCE and in the US for its asset management capabilities via our 26 asset management affiliates. The challenge is to expand the Natixis brand in the US so that clients are more familiar with our products and they therefore become carried by those distributors serving retail clients.

What will be Natixis's differentiating factor from competitors in the Americas?
We are going to leverage our quantitative background as a French bank with excellent trading characteristics; these are qualities that are appreciated by clients and investors alike.

The New Frontier strategy is a group initiative and we are going to play our part in a global plan that is aimed at leveraging our capabilities, including the strength of our financial engineering team, and expanding the resources in some of the group's activities. In the US, equity derivatives is a key part of that plan and we are investing in building the teams and the structured notes platform to execute that strategy and provide the product and the service in the secondary market.

How is Natixis going to achieve this?
To do this, we have developed a close collaboration with the fixed income team at Natixis to have a cross-asset set-up, as we understand this is the best way to respond to the needs of our clients. I think that is going to be key, because our clients in most cases have a cross-asset organisation and we have to be able to offer not just equity derivatives, but also fixed income, foreign exchange, commodities, etc. In fact, we believe that the offering of hybrid structures to our clients is going to be a driver of our activities. At the moment, the income needs from investors are driving most of the product design in the marketplace, in part because investors are Baby Boomers or people that are relying on deriving income from those investments as they approach retirement. The demand for income is there and structured products are a viable solution to cater to this need.

We can provide shorter-term equity derivatives products that monetise the volatility embedded in certain types of stocks in order to pay higher coupons, which you can achieve via reverse convertibles or autocall type of products. But we can also provide longer-dated principal-protected structures including fixed income which have some elements linked to the equity market in order to boost the income element.

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