In the second of a two-part article, Richard Jory talks to Yann Garnier about going local, finding the right products, client connectivity and China.
Two years after establishing itself in Japan, Societe Generale looked to South Korea, the largest derivatives market in the region with the second largest pool of institutional assets. Again, the bank decided to go local. "You need to create a dialogue with the regulator," said Garnier. As a leader in derivatives, we ought to play a role in educating the market and spending time with regulators explaining what structured products and solutions are and what we deliver, from credit to market risk.
"We decided to go local in every jurisdiction in which we wanted to be in the top three, which means going to see the regulator and apply for additional licences," he said. "We want to adapt our global offering to comply with local regulations, so we have asked for their advice. Employing locally also means investing locally, so we ask for the support of regulators while assuring them that they can trust us to work alongside them and according to the rules."
In the less bullish markets of 2011, 2012 and 2013, when investors were looking for alternatives, one answer was longer term products, "our structuring teams developed all the hybrid ranges - a combination of payoffs covering equity, rates, or equity and FX, adding on request a credit component for the most sophisticated investors," said Garnier. "That lasted for two or three years, when these products benefitted from the rich funding of banks, which were looking to improve their balance sheet... 2015 to 2016 was more about credit-linked notes, reverse convertible on CMS, and income-paying products. Markets were dull and clients were looking to get coupons from a linkage to credit or CMS.
"In Asia, when a product becomes successful, it draws a huge amount of interest and money all of a sudden," said Garnier. "It's the case for autocalls, for reverse convertibles on CMS, where we traded from private banks to large institutional investors, or for CLNs. Another characteristic is size: once there is a landmark trade, it is usually repeated, and that's the story of last year on mutual funds."
The market in Asia is now more mature, educated and regulated than ever, a trend that will continue, according to Garnier. "To be successful, we need to make sure that we start from what investors are looking for - not only in market exposure (long equity, market neutral, diversified, looking for yield), but also the simplicity of the experience we give to the client," he said.
"If you improve the customer experience and care about both long-term performance and service quality, the market naturally grows," said Garnier.
The next challenge and opportunity for the bank is to move from market access to become one of the leaders in client connectivity, which means offering a seamless connection to its product platform to investors from large institutions to third party distributors, according to Garnier. "Connecting to and accessing research reports, viewing and trading product offerings, accessing more sophisticated services - such as simulations, market screening or risk analysis - and getting all post-trade information, such as reports and coupon acknowledgement, and so on," he said.
"The next frontier is the meaningful development of markets in China," said Garnier. "The suitability rules are already there for some parts of the market and investors are much more advanced in digitalisation than in any other market. The market size and trading volumes are mind boggling."
The Personality of the Year Award will be presented to Garnier at the SRP Asia Pacific 2018 Awards Dinner, which will take place on the evening of Wednesday 18 April at the Sofitel Singapore City Centre Hotel, Singapore. Garnier was chosen on the basis of receiving the highest number of votes from the 402 respondents to the SRP Asia-Pacific Awards Survey 2018.
The 5th SRP Asia-Pacific Wealth Management & Fintech Conference 2018 will take place on April 18 at the Sofitel Singapore City Centre Hotel in Singapore: the agenda and details of the conference are available at this link. For registration or information, please contact Helga Tirk at helga@structuredretailproducts.com
Related stories:
SRP Asia 2018 Personality of the Year (part 1): Yann Garnier
SRP Asia-Pacific 2017 Personality of the Year: Adam Cowperthwaite
SRP Americas 2017 Personality of the Year: Jason Broder, Goldman Sachs