In the second of a two-part article, Jordy Klijn, investment professional at ProBeleggen, the online platform where retail investors, in return for a subscription fee, can follow the insights of a professional investor one on one, talks to SRP about the structured products he invests in, why he prefers shares over indices and his vision on the Dutch market.

"The fundamental question for me is always leading," said Klijn. "I follow the Dutch market closely. I am happy that I understand the AEX and how much a certain company is worth. I follow the publications. I have a view of knowing a lot about little."

Once Klijn has spotted an interesting company and an interesting share, the next step for him is to start looking at the different structured products which are linked to this share. "Sometimes, if there is a period with a lot of movement, a Rendement certificate (capped bonus certificate) can be interesting. But there are other times when I look at a memory coupon note, or a turbo, depending on the market conditions," said Klijn. "The type of products I go for also determines the weighting that I apply. If it is more risky, then I tend to allocate less money to it. These are all instruments to manage my risks."

Although Klijn prefers products linked to single stocks, some structured products in the Netherlands, such as Garantie certificates (full or partial capital protected certificates) and Twin-win certificates, are only available on a small selection underlyings, mainly the AEX or Eurostoxx 50. "That's true. These are products where you have very little choice in terms of underlying and then you have to look at indices. For 60 to 70% I invest in individual companies and for the other 20 to 30% I look at indices."

Garantie (guaranteed) and Twin-win certificates are also two types of products that can actually strengthen or lower the risk, according to Klijn. "With a Garantie certificate, you limit the down side by giving some of your upside away. These certificates are largely focused on increase. With Twin-win certificates, if the markets stay level, you do not earn anything, but if the underlying stays within a certain range, regardless whether it rises or falls, you also earn a premium.

"For me that is also a bit of diversification for your portfolio, also in terms of direction," said Klijn. "By placing a Garantie certificate against a Twin-win certificate, I can compensate any possible losses of the Garantie certificate with the potential profits of the Twin-win. That's how I try to combine the different products to reduce the risk."

Klijn is mainly focused on the Netherlands, the market which also appeals the most to his customers, and in the past few years he has accumulated plenty of knowledge about the local AEX index. "That's where my focus lies in principle, but I do look at it from a broader European perspective. I look sideways at the Dax and the Eurostoxx 50. I do have a macroeconomic vision for Europe and the Netherlands," said Klijn who still sees potential for companies in this region.

"However, I do think you have to be selective which companies you select now because certain companies are quite pricy, and when I look at analyses of certain growth expectations I think 'is that realistic to continue that line?', so I am selective.

"I do sometimes look at the German market," said Klijn. "You can see that the supply of structured products there is many times greater than here. To some extent, I note that there is not a very big difference in the costs of the spread. It is slightly more expensive here in the Netherlands because the volumes are somewhat smaller."

Structured products have a certain quality, according to Klijn. "They have certain characteristics that I think can be an addition to every investment portfolio, whether you are a retail investor, invest as a professional at ProBeleggen, or invest as an asset management client," said Klijn who believes that banks could also make much more use of structured products.

"I think that once the attention for structured products increases, that the number of products on offer will increase, and then the spread costs will move more towards those in Germany," said Klijn. "Let me put it this way, at this moment I think it is not too expensive to invest in the Netherlands. It is just a very nice product, a niche, and with my portfolio - besides transferring my knowledge - I want to generate the interest of people for this specific playing field."

In the Netherlands there are currently only a limited numbers of active providers of structured products, predominately BNP Paribas, Commerzbank and Kempen, and Klijn agrees that the number of products on offer is still very thin. "The market is certainly not yet mature," he said. "Ideally we would need more providers and the number of investors in structured products needs to increase too. I hope that at ProBeleggen with my portfolio we can stimulate interest among retail investors."

ProBeleggen has regular contact with Commerzbank and with BNP Paribas to exchange ideas about certain structured products, for example about new series, according to Klijn. "The contact with BNP and Commerzbank is very good and we strive to keep it that way or perhaps intensify it if we can stimulate the market because we believe that for all investors in the Netherlands, both professional and retail, structured products are just a very good tool which can be an addition in any investment portfolio," he said.

"So we are very enthusiastic about it and we hope to play a role in bringing these products to the attention of a larger audience."

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