French bank Natixis is well known for its deep derivatives competency in Europe, but the brand is a relative newcomer in the US structured solutions retail investor marketplace.
Natixis has been building its brand awareness and structured products business in the US since it first burst onto the scene in April 2012. Natixis initially offered several single-equity linked unregistered notes during 2012, according to the SRP US product database. A company spokesman confirmed to SRP that the bank’s entire US structured products platform was completed by January 2013 with the addition of fixed-income structured note capabilities. The firm has marketed 50 structured notes in the US market since its arrival in 2012, of which seven structured notes are still live.
Initially, the French bank hired US law firm Davis Polk to help the bank navigate the US regulatory unregistered note landscape and proper disclosure minefield. By January 2013 the bank offered its first fixed-income linked Step Up Callable Note.
“We have been focused on providing products that US investors demand and that we can market,” Javier Blanco, executive director, interest rate derivatives and structured products sales at Natixis in New York told SRP. “We need to provide flexible payoffs and customer solutions.”
Since its US market debut, Natixis has spent a great deal of time behind the scenes perfecting its financial modelling, developing pricing techniques and processes so as to be able to offer a regular array of structured products to retail investors. “To price long-dated callable spread options is quite a task,” admits Blanco who is in charge of the fixed-income/interest rates side of Natixis’s US structured products business, part of the bank’s Global Markets Americas division, headed by Denis Prouteau.
Death puts
One of the big focuses for Natixis had been the ability to build and offer a “death put” (also called an “estate put”) into its structured notes which offers a payoff if the note holder dies. While this feature has been around for years, and has been used by many issuers within the US marketplace, this was new to Natixis but was a retail-centric investor ‘must-have,’ Blanco said. “That death put took months to develop,” added Blanco. “Now we can model, price and process death puts.”
Year to date, much of the structured products business building continues, along with Natixis offering steepener and other notes. The firm sold an $8m 20-year callable hybrid steepener note in April that was linked to the spread of the 30-year CMS – two-year CMS and the S&P500 Index. The most recent deal Natixis closed in July was $10m for a 20-year steepener linked to the 30-year – five-year CMS. This note had a death put feature – the first time Natixis offered a US steepener note with a death put.
Now, Natixis is seeing typical fixed-income structured note sales of $10m or more. It has allied to offer retail products through multiple distributors and private banks that include Incapital, Capital Guardian, Maxim and the retail adviser network of Morgan Stanley.
Blanco said that the bank continues to receive a great deal of reverse inquiries for structured retail products, and that it won’t turn its back on institutional investors. “We look forward to providing institutional investors with customised solutions to meet their needs,” Blanco said.
Learning curve
However, Natixis has recognised that there is a learning curve and that it can take quite a bit of time for financial advisers and their clients to become educated about Natixis’s very good credit rating, as well as what value the Natixis brand offers, and then warm up to its products.
“We spend a lot of time with investors to reinforce the Natixis franchise,” Blanco said. The goal going forward is to expand the Natixis brand, explain that this French bank has derivatives expertise, and widen the array of structured product offerings with various payoff structures, he added.
“We are proud of our consistency and the amount of products and features we have offered,” said Blanco. “We have had a fixed-income deal almost every month since 2013. We need to show that we are an active issuer.”
Market rumours around Natixis in the US suggest that Sam Rosenberg, who gave up his position as global head of financial engineering at Newedge’s Prime Clearing Services (PCS) division in July, could be joining the French bank as head of sales solutions, Americas.
Related stories:
Natixis appoints head of solutions sales Europe
Natixis appoints global head of equity derivatives sales
Natixis poaches MS global head of financial engineering
Natixis Japan to spearhead APAC expansion