Turnover for Swiss structured products amounted to CHF70.7bn (€64bn) in Q2 2017 which translates to an increase in value creation of 24.1% by the Swiss structured products providers compared with same quarter of 2016, according to the Swiss Structured Products Association (SSPA). Over the entire first half-year 2017, growth amounted to 16.2% compared with first half-year 2016.
According to the SSPA report, demand for yield-optimisation products remained strong, accounting for about 58% of the total. 49% of all products are equity-based, followed by foreign exchange at 34% (decrease of 11 percentage points relative to the previous year). An increase however can be observed in turnover in the fixed income segment. Non-listed products constitute about 71% of the turnover.
National as well as international investors are discovering more and more the investment opportunities with structured products, according to Juerg Stahelin (pictured), executive director at the SSPA.
"Obviously, there is a bigger appetite to benefit from the favourable market conditions and Yield enhancement products offer a solid investment performance," said Stahelin. "The current investment sentiment is rather positive and the demand for innovative investment products has increased continuously."
The SSPA report also shows that product group shares shifted compared to previous year with yield-optimisation products accounting for the market's lion's share at 58%. Participation products took the second largest portion at 14.5% while leveraged products made up 14.2% of the total. Products offering capital protection continued to show an increase in demand and compared to Q1 2017an increase of 15%.
Foreign exchange and equities remain the most frequently used underlying assets. Equity products represent the largest portion of total turnover, growing from 45% to 49% since Q2 2016. Compared to prior year, the share of foreign exchange products decreased from 45% to 34%. The share of fixed income products grew by 158% compared to Q2 2016 to now 12%.
Non-listed products constitute about 71% of the turnover; this corresponds to a decline of the share of non-listed products compared to Q2 2016 (previous year: 73%).
Even though the primary market represented a stable and larger share of turnover (66%), the secondary market again comprised around 95% of all transactions in Q2 2017.
With a total share of 89%, USD, EUR and CHF are still by far the major currencies used: USD is the predominant currency in Q2 2017 with a share of 42% (prior year: 36%). The share of EUR is decreasing to 29% and CHF remains stable at 18%.
According to Stahelin, the association expects this trend to continue, "however it might be difficult to see similar growth throughout the entire year", and is working on streamlining its SP Portfolio Optimizer, the bespoke app developed in close collaboration with Swiss fintech firm SwissQuant, earlier this year.
"We are working on the further optimisation of our Portfolio Optimizer App and plan to launch a browser version in the coming months," said Stahelin. "Additionally, we are discussing the offering of the industry for pension funds as structured products could be a solution for enhancing the investment performance of pension funds."
Stahelin said that the association is looking to hold discussions with retirement provisioning experts, at this year's annual forum in Lucerne to explore possible approaches. "In addition, we have formed a new working group in the association in order to promote this initiative in a close and targeted manner," said Stahelin.
The development of the new app begun in the summer of 2016 after SwissQuant joined the Swiss trade body, with the goal to help investors to better understand the risk return patterns of structured products in a portfolio context as well as to perceive market risks and to show the benefits of strategic usage of structured products.
Year to date, the SSPA has bolstered its membership with the addition of Picard Angst, an independent solution provider for structured products, asset management and commodities, as well law firm Baker McKenzie, Indosuez Wealth Management and Kepler Cheuvreux. YTD, the SSPA has added six new members to its ranks to the existing 26 members.
SRP data shows that year to date Citi has been the most active provider with over 90,000 products marketed although sales remain low at CHF90m. Sales volumes continue to be dominated by domestic banks with Vontobel (CHF4.3bn/5,470 products) leading the pack followed by Leonteq (CHF1.6bn/784 products), UBS (CHF874m/416 products), Credit Suisse (CHF679m/321 products), Raffeissen (CHF579m/275 products), Julius Baer (CHF571m/272 products) and Zuercher Kantonalbank (CHF465m/221 products).
From an underlying perspective, baskets of domestic blue chips (Nestle, Novartis and Roche) continued to drive most sales (CHF339m) followed by index baskets comprising the Eurostoxx 50, S&P 500, Swiss Market Index (CHF326m). Investment certificates with CHF7.4bn dominate sales by wrapper followed by leverage certificates (CHF59m), and medium term notes (CHF55m).
SSPA members cover more than 95% of the market volume for structured products in Switzerland.
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