VDK Spaarbank (VDK) has launched the SG Issuer (LU) Autocallable Finvex Sector Note in Belgium. The nine-year, 100% capital-protected medium-term-note has a knockout feature and is linked to the Finvex Sector Efficient Europe 30 index. The note is issued in collaboration with SG Issuer, a Luxembourg domiciled entity wholly owned by Societe Generale.
It is the first time that VDK has used SG Issuer for its structured products. The regional savings bank’s most recent products were issued via Codeis Securities, while in the past VDK has also used SecurAsset and Credit Suisse as the issuing party.
“We mainly use Codeis when we do products with our own VDK funding,” said Frank Vereecken, director in the securities department at VDK. “This time, we have opted for SG Issuer, also from the viewpoint of diversification. We don’t always want to offer our clients the same funding.” However, we do not rule out the possibility that VDK will issue products with Codeis (which means the funding goes back to VDK) in the future, said Vereecken.
The product features an autocallable payoff, which, according to the Financial Services and Markets Authority’s (FSMA) moratorium on the distribution of complex structured products, can only be implemented if the number of mechanisms used to calculate the return is limited. “A maximum of three mechanisms applies,” said Thomas Denil, product manager structured products at VDK. “All structured products we issue are fully compliant with the moratorium and have been checked by the FSMA prior to issuance,” he said. “The autocall feature, combined with capital protection, is indeed one mechanism.” In cases where there is no full capital protection, this counts as an additional mechanism, according to Denil.
The note is linked to the Finvex Sector Effiecient Europe 30, which offers exposure to 30 European stocks chosen from 10 sectors: base materials, communication, cyclical and non-cyclical consumption, services, energy, financial companies, industry, technology and diversified. The index, which was launched on April 21, 2015, but was calculated from an initial value of 1,000 points on February 5, 2001, has outperformed the benchmark Eurostoxx 50 on annualised performance (4.5% versus -1.0%), performance over one year (6.2% v -3.9%), and historical volatility (14.2% v 21.1%).
Smart-beta indices have a better performance risk ratio compared with the traditional benchmarks, according to Denil. “I’m not only talking about the Finvex indices, because this is only the second time that we issue a product linked to a Finvex index, but, in general, the performance ratio of these indices is much better and, also, when it comes to risk, they are a lot more interesting.”
SRP’s Belgian database lists nine structured products worth €75m from VDK Spaarbank. Apart from the Finvex Sector Effiecient Europe 30, the products, which date back to September 2013, include offerings linked to the Ethical Europe Equity, iStoxx Europe Quality Income, iStoxx Europe Next Dividend Low Risk 50 and the Finvex Sustainable & Efficient Europe 30 indices.
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