Structured products have seen a resurgence in Singapore in 2017 with customer demand and sales increasing exponentially year-on-year across the market, according to Gidon Kessel (pictured), head of structured products at United Overseas Bank Limited (UOB) in Singapore. "This can be attributed to a combination of factors including strong performing equity markets, improved investor sentiment and continued appetite for yield owing to persistently low cash rates," said Kessel.

According to Kessel, demand for capital protected alternatives has picked up, particularly around fund linked structures, as optics improve. "Capital protected fund-linked structures have proved popular this year," said Kessel. "However, this still constitutes a relatively small part of our flow."

In the past 12 months, the bank has expanded its capital protected structured notes range to include fixed floor floaters, equity snowball autocalls and fund-linked payoffs, according to Kessel. "This is supplemented by our monthly structured deposit offering which caters primarily for our broader retail banking segment," he said.

Recently, UOB launched the first ever fund-linked structured deposit in Singapore, according to Kessel. "The idea has been popular for the last 12 months but in a structured note format," said Kessel. "The premise of the proposition is to offer protection with performance linked to the underlying fund."

However, the main benefit of the release of the deposit wrapper in the retail space is that investors can more actively avail with lower ticket sizes, according to Kessel. "Structured notes are usually privately placed and therefore only available to a specific segment of investors," he said. "Moreover, the subscription ticket sizes for structured notes are higher." Broadly speaking, Kessel believes that UOB's newest deposit offering facilitates wider reach to the bank's broader retail banking segment.

By volume, UOB is a leading retail distributor of structured notes in the market, according to Kessel. "We attribute this to the breadth and depth of our proposition," said Kessel. "Unlike many other local peers who limit number of launches and adopt more traditional book build approach, we facilitate larger frequency of trades with smaller ticket sizes to accommodate out client demand."

Kessel also noted that this allows more choice and flexibility to the bank's clients who are not compelled to subscribe to limited number of structures. "For example, if one client has specific preference on KI level or coupon, structure can be accommodated," he said. "We offer a range of 14 active payoffs and trade in excess of 300+ trades per month."

The bank prides itself on the performance of its solutions, according to Kessel. "This is complemented by our life cycle management tools which allow us to engage and update our clients post trade such as corporate event notifications, performance tracking, etc.," said Kessel, pointing that current pricing environment remains a challenge for the bank, with the continuously low interest rates impacting the optics and structures which can be offered.

"This is more apparent for certain currency denominations owing to rate differentials," he said. "However, we anticipate USD funding to progressively improve over the coming years which will add further flexibility and payoff alternatives, particularly on the full and partial capital protected solutions."

According to Kessel, the industry is facing a number of challenges around "regulation, digitisation and automation", as well as "growing competition from non-traditional players and more discerning and demanding clients".

"Regulation is for good reason and is not impacting the industry negatively," said Kessel. "Rather the need to adapt and be nimble is more apparent."

According to SRP Data, UOB is the leader on the market for structured products in Singapore in 2017, year-to-date, with net sales of S$301m, followed by Macquarie Group and Commerzbank with net sales of S$125m and S$64m, respectively. As compared to the same period last year, UOB's net sales, however, decreased by 88%.

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