The Belgian structured investment products market is dominated by KBC to such an extent (the banc-assurer sold in excess of €5bn worth of structured funds, unit-linked life products and medium term notes in 2013, representing a market share of 61%) that it has often been overlooked that there are a large number of other active providers in Belgium, making the country one of the most vibrant for structured products in Europe despite the regulator’s moratorium.

One of those “other” Belgian providers is bank-insurer Argenta. Founded in 1956 as a finance company specialising in personal loans – the modest initial capital was provided by the families Schryvers, Kuijpers and Van Rompuy – Argenta gradually worked its way up to position itself behind KBC, BNP Paribas Fortis, Belfius and ING.

Last year Argenta, which has its headquarters in Antwerp and is also active in Luxembourg and the Netherlands, sold 17 structured products worth around €210m, cementing its position in the second tier of the Belgian market, sandwiched between Crelan (€227m/13 products) and BPost Bank (€198m/13 products).

In April the bank-insurer reported that assets under management (AUM) for all its investment products increased by 3.3% to €36.4bn in 2013.

SRP spoke with Jos Stappers, team manager savings and investments at Argenta about the bank-insurers’ structured products, its relationship with BNP Paribas and Société Générale and the impact of the moratorium.

Underlyings
Stappers told SRP that Argenta offers investors the choice of a wide range of asset classes for its structured products, from equities such as share baskets and single indices, to funds, FX rates and interest rates and chooses its underlyings by quarterly looking at current topics. Its most recent product, SecurAsset (LU) Bond 2020/08/17 Spanish Growth, is linked to the Spanish Ibex35.

“Spain for example has long been undervalued but now the Spanish economy is flourishing we see an increased interest from clients in Spanish underlyings,” he says.

Known for its cautious nature, a feature which is reflected in its customers and its structured products, the bank-insurer each year reinvests the majority of its profits in the company.

“Our clients demand capital protection,” says Stappers. “Often this is only feasible if a product has a cap. If investors want the full upside they would do better to invest directly in equities,” he says.

The structure Argenta uses the most is that of a product linked to a basket of shares which offers full capital protection with a guaranteed minimum yield. “This offers security for our clients,” Stappers says. “Admittedly, a few lesser performing shares can influence the performance of the basket as a whole. That’s why we limit the fall to minus 25%.”

Whilst Argenta is looking at the current topics of interest, Stappers insists that at the same time the bank is also looking further ahead. “We are not just looking at the short term. We do see for example possibilities in Brazil but maybe it’s just a little bit too early. Commercially Brazil is probably not yet viable.”

Counterparties
When it comes to counterparties, Argenta’s strategy seems clear and simple from the outside. The bank-insurer’s notes are issued via SecurAsset, a Luxembourg-domiciled special purpose vehicle which is part of BNP Paribas, while its unit-linked life insurance products (Tak 23) are issued in collaboration with Société Générale.

“We do not have an exclusivity agreement with either of them and could start working with other issuers any time we want to,” Stappers says. “However, experience tells us that both BNP Paribas and Société Générale are able to provide the service we require while both have also a sufficient knowledge of the Belgian market.”

The majority of Argenta’s products are wrapped as medium-term notes. Last year the bank launched 13 structured notes and just four Tak 23 life insurance products while so far this year it has launched seven EMTNs and one Tak 23 product, although according to Stappers the difference in issuance between the two wrappers has mainly to do with IT systems. “A Tak 23 product demands more preparation. Notes can be issued quicker,” he says.

Moratorium
In 2011 the Belgian regulator the Financial Services and Markets Authority (FSMA) introduced a moratorium on the distribution of particularly complex structured products, to which the majority of Belgian providers, Argenta included, signed up.

Under the moratorium, certain structured products, including some autocalls, are no longer allowed.

Stappers agrees that protecting investors against complex products is a good thing. “Investors need to understand how a product works,” he says. “I give you an example. If the Spanish stockmarket performs well, it should be easy for the investor to see this reflected in the performance of the product.”

However, according to Stappers the measures implemented by the moratorium do not always work to the advantage of the investor. “The number of mechanisms to calculate the return is limited to three, which can be a disadvantage,” he says.

Belgian market
After a difficult period following the Lehman collapse and the financial crisis, the Belgian market has seen an upward trend since 2011, with sales volumes on the up while the number of new issues is also increasing.

“Sales have indeed increased slightly”, says Stappers.

Stappers is fairly positive about the potential of the Belgian market in general and about its returns. However, he does have some reservations, especially about the 90% protection products the market is currently being flooded with.

“We don’t think this is the way forward,” he says. “If the market starts to evaluate negatively I worry that we might end up with the same scenario as what happened in 2008 to clients of Citibank Belgium who invested in Lehman products and ended up losing their money.”

Click here for an overview of all Argenta products listed on SRP’s Belgian database.

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