Investors in Finland have reacquainted themselves with capital protection this year, although the choice continues to be balanced with performance. “In the past quarter, capital protection has reminded of its usefulness,” said Jyrki Iisalo, head of structured products Finland at Handelsbanken and the chair of the FSPA (Finnish Structured Products Association).
“Of course, the performance is why these investments products are made, although the capital protection, when it comes off, is the most valuable part of the investment,” said Iisalo. “Although investors are annoyed [with the current investment market, those investing in structured products] are much less annoyed than those investing directly. Some investors have come to really appreciate structured products in the Finnish market because of their good performances.”
Little moved on the month, the number of retail structured products released in Finland in September, at 21, was 37% down on the year. This year, sales volume are 45% lower than they were in first three quarters of 2014. Part of the change can be attributed to a greater move to issue products to private banking investors. “The first two quarters of this year saw a good development [of the Finnish structured products market], better than in 2014, but the volatility of the third quarter has brought a slowdown,” said Iisalo. “The structured products trade association has only collected statistics from the first half of the year, though.”
Of the 21 products striking in September, the highest registered sales volume was from Alexandria Pankkiiriliike, whose Tähtirahastot Teho Yhdistelmälaina 8 sold €4.3m. The product was linked to the Markit iTraxx Europe Crossover series 23, and offers a 225% rise in a fund basket.
Of the 23 products maturing in September, the two best performers were offered by Handelsbanken: Osakeindeksiobligaatio Kanada Balance 5060B offered 124.73% (4.5% pa) and Osakeindeksiobligaatio Kanada Balance 5060A 116.8% (3.14% pa) after five years. The products were sold at issue prices of 110% and 100%.
This year, 11% of products have offered full capital returns, with no fully capital-protected products.
In the first three quarters of 2015, 55% of products were linked to equities, 15% were hybrids, 13% were linked to credit, 8% to commodities, 2% to FX rates and 0.03% to alternatives. “The interest rate has made for a reduction in the amount of capital-protected products,” said Iisalo. “The replacement is different certificates. For this year, credit-linked products are going to be more popular than equity-linked, although at the beginning of the year the situation was the opposite.”
“The FSPA and SPIS [Finnish and Swedish structured products associations] are together suggesting a concrete risk model to Esma [the European Securities and Markets Association] in response to its Priips [packaged retail investment and insurance-based products] technical memo,” said Iisalo. “The FSPA is strongly in favour of the suggestion that different types of investments should be comparable with others, which, for example, the suggested risk model will help to promote.”
The full Finnish market review is available here.
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