Last year was "fantastic" for structured products space in Asia, according to Gidon Kessel (pictured), head of structured products at UOB, speaking on the SRP Performance - Two Good, Two Bad panel at the 5th Asia-Pacific Wealth Management & Fintech Conference at the Sofitel Singapore City Centre Hotel in Singapore on April 18.

All distributors did very well, while clients, in their search for yield enhancement, were willing to take more risk, which strengthened the market, according to Kessel. "We had velocity and the returns were high," said Kessel. "We saw that trend continue in the first quarter of 2018, but it's now slowing down. However, optics and pricing remain more attractive than they were last year."

The positive momentum of the first quarter somewhat slowed in the second, according to Martin Goerojo, head of structured products and fixed income at Citi in Asia. "There is some market volatility causing some uncertainty.”

Given the market turbulence, investors have shifted from high return to protection, according to Jeremy Ng, chief executive officer at Leonteq Securities. "That is why features are more important to investors," said Ng. "One feature we have been proposing to its investors is the lockin... Hope for the best and prepare for the worst!"

"Investor interest shifted from the yield enhancement structures of 2015 and 2016 to more participation type of products in 2017," said Ng. "In the current market, the return from a participation note offers is a lot higher than the usual yield enhancement product, which gives a return between 12%-18% per annum." Additionally, there is a lot of secondary market trading in structured products, which is driving the increase in enhanced returns, not just in North Asia but in Asia as a whole.

The trend for fund-linked products has continued this year. "We have a significant distribution of mutual funds and that business is driving growth for us," said Goerojo. "People are familiar with the funds and we don't see them being replaced by any other product. However, there is a difference in that single underlyings have been preferred, typically high-yield bond funds." According to Ng, there has also been a shift from more fixed-income types of funds to either loan or equity long/short funds.

At the same time, the market in South Korea continues to be dominated by autocallables, mainly because volatility has increased and people are starting to get a little more cautious, according to Ng. "Investors in Korea pay more attention to indices and, since volatility is a bit higher, looking just at products using indices tends to offer decent yield," said Ng. "However, we are beginning to see a slow shift from single stocks into broad market indices and even some sector indices."

In Singapore, investors are more conservative and are typically buy and hold, according to Kessel. "Certainly yield is more important than capital protection and investors in Singapore prefer products such as FCNs (fixed-coupon notes) and autocalls," said Kessel. "UOB does structured deposits linked to funds, of course. However, we focused on adding payoff variations, like the knockout glider and the knockin reset."

In India, there has been an inflow of US$20 billion into fixed income, according to Vivek Sharma, head of Southeast Asia and Middle East at Edelweiss Global Asset Management. "Given the increase in volatility this year, fixed income is going to be an even more interesting asset class for clients."

India has also adopted the trend for fund-linked notes, equity baskets, single stocks and autocalls, although investors do not have to choose between yield and capital protection, given the high interest rates, according to Sharma. "We offer clients reasonably good participation with capital protection," said Sharma. "The market in India is evolving and allows foreign investors to participate. We are focused on bringing the ideas we are working on onshore to international investors."

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