Retail investors stand firm but EU regulatory pressure has led to moderate sales in the first quarter

The Belgian Structured Investment Products Association (Belsipa) has reported sales of structured products in the primary market accounted for €922m in the first quarter of 2018, a decrease of 33% compared to Q4 2017 and of 28% when compared to the equivalent first quarter of 2017. The turnover of structured products sold on the secondary market in Belgium amounted to €1.1bn, an increase of 4% quarter-on-quarter but a decrease of 10% year-on-year, according to the trade body.

"The EU legislation that came into force in January has [had] a tremendous impact on the sales process, in particular the compulsory delivery and explanation of key information documents (Kids) to retail customers, as is required by the Priips (packaged retail and insurance-based investment products) regulation," said Thomas Wulf (pictured), secretary general, Belsipa.

Another aspect is the necessary verification of new markets in financial instruments directive (Mifid 2) requirements, and in particular the application of the target market criterion, according to Wulf. "Overall, sales staff at all distributors/distribution business lines in Belgium have undergone and continue to receive substantial training on all before elements," said Wulf, noting that the complexity of the new regulatory requirements also impacts the scope and content of the advisory conversation.

"The focus is being put on regulatory compliance and a high degree of caution is being applied when it comes to non-regular assets as structured products. In our eyes, this impacted the sales volumes in the first quarter."

At the end of March 2018, the outstanding volume in structured products held by customers of the data-submitting entities was €31.20bn, which is an overall decrease of 3% compared to the end of the fourth quarter of 2017. The decrease was driven by structured funds which, at €6.3bn, had 12% less assets compared to Q4 2017. The outstanding for structured notes remained level at €14.4bn while structured insurance products dropped by 3%, from €10.6bn at the end of December to €10.3bn at March 31, 2018.

The number of new structured products issued in Belgium between January and March 2018 increased by 47% (818 products issued in Q1 2018 against 556 new products in Q4 2017). Of these, 89% of all new products were issued in the leveraged products segment. Numbers given on leverage products include listings on Euronext Brussels only and, according to Wulf, the increase is down to a strategic enlargement of offerings by selected issuers "due to market opportunities".

Structured notes increased by 8% compared to Q1 2017 while the number of structured funds fell by 33% in the same timeframe. Measured by underlying type, equity-linked instruments represented a share of 88% of all newly issued products an increase by 59% compared to the fourth quarter of 2017. Turnover in equity-linked products in the first quarter accounted for €597m (primary market) and €880m (secondary market), respectively.

At the end of March 2018, a total of 3,255 products were open on the Belgian market. The number of available products remains roughly the same as at the end of the fourth quarter of 2017 (3,410). Notes are still the dominating format of structured products in the Belgian market with 44% of all non-matured products at the end of March 2018 (1,445 products out of 3,255).

Belsipa was founded in 2013 and has Belfius, BNP Paribas Fortis, ING Belgium, KBC, Societe Generale (France), Commerzbank and Natixis as full members. Axa Group, Crelan, Bank Nagelmackers, AG Insurance and Deutsche Bank also provided data to the report which covers approximately 95% of the Belgian market.

Click the link to view the full Belsipa 1Q 2018 market report on retail structured products.

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