In the second part of an interview, Jordan Sfez (pictured), managing partner at French structured products specialist boutique HPC Investment Partners (HPC IP), talks about the company's plans for expansion as well as the products and strategies driving activity among private banking and institutional investors.

As well as tier one private banks in Europe, HPC is also seeking to expand beyond Western Europe, and respond to "increasing demand from Central and Eastern Europe for diversification", according to Sfez. "This tells us that investors are becoming more sophisticated as, in the past, they would just buy whatever they were familiar with and put additional risk in their portfolios," said Sfez.

The company's relationship with OTCEx Group is also "helping us to look at other core structured products markets, such as Hong Kong and Singapore, where we can add value to manufacturers and relationship managers, but also in more satellite markets such as Japan or Taiwan," said Sfez.

"We are opening an office in Dubai to be closer to some of our existing clients in the region, and to target other markets in the region," said Sfez. "We are also investing in our coverage of the French market, as we feel there is room to serve institutional and corporate clients.

"In the current interest rate environment, clients need access to diversification and high-yield solutions," said Sfez. "Idea generation is one of the pillars of our offering, and our background has helped us to be open and think outside the box to respond to the needs of our clients with alternative solutions."

The company has also launched a weekly newsletter, with analysis on themes and product ideas that "can help investors counter the effects of the economic backdrop and, or sudden market moves with different structured products and payoffs that can help extract value from those assets", according to Sfez. "There is a consistent appetite for sources of yield and the credit markets provide an opportunity to capitalise on this trend," he said.

The company has transacted a number of tranches linked to the iTraxx Crossover as well as several reverse convertibles linked to the five-year swap rate, soft protected range accruals linked to the three-month Libor and credit-linked notes (CLNs) based on Italian sovereign risk, mainly to respond to demand from investors expecting an interest rate rise, according to Sfez.

"We see increasing demand for CLNs linked to wider high-yield indices, as opposed to single names," said Sfez. "Over the last few weeks, we have seen credit spreads widening in Europe, and this provides opportunities and room to structure different solutions aimed at specific risk profiles."

Another product type gaining traction as an alternative to proprietary indices over the last two years are capital-protected notes linked to baskets of funds, according to Sfez. "This kind of product offers an interesting payoff, as returns are linked to funds from big names in the market (Fidelity, Pimco, Jupiter...)," he said. "Most of the demand for this kind of product came from Asian investors, but European investors have also approached us on the back of the recent performance of those products. This complements our idea generation approach as we can also scan the market and look to replicate existing strategies we think would add value to our clients."

According to Sfez, private banks want to offer high-yield structures to their clients, but single and multi-family offices are more into timing their positions and offering leverage via loans, "so it is very important to be able to respond quickly to those requests".

"Most of the products we are selling are short-term (two to three-year) products, but we have also sold five-year products to clients seeking longer investment terms," said Sfez. "We [also] see demand for sharia-compliant products, and this is an area where we can also leverage the expertise within the firm. We're not about pushing products, but about leveraging our expertise to provide solutions to our clients."

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