Caixa Geral de Depósitos (CGD) has strengthened its position in Portugal's market over the last two years reaching the top spot in the issuance table and second in terms of sales (€1.2bn) during 2015. Year to date, the state-owned bank stands in first place in terms of market share (48%) and sales volumes (€200) with Millenium BCP (37%/€154m), Barclays (5%/€20m), Santander (37%/€154m), and Deutsche Bank (4%/€17m) completing the top five. SRP spoke to Jeremy Dykes, head of trading at CGD in London, about the success of the bank's 'Up, Down and Stable' structured deposit range which has raised an estimated €305m by offering investors products with different risk profiles in an increasingly "directionless" market.

January 2016 marks the second anniversary since CGD launched the first round of 'Up, Down and Stable' deposits aimed at Portuguese retail investors which offer the opportunity to choose between three risk-profile options. How did this range come about?
The main reason behind the decision to issue this product range was to give more freedom to investors. The ultimate reason behind any decision, with respect to product offering, is to provide the client with the opportunity to experience a return on their investment. Typically, any offer relies on the chosen underlying performing in a predetermined direction, ultimately a "leap of faith". By providing the customer with mutually exclusive solutions that nevertheless cover the entire market possibilities, we free ourselves from this so-called "faith" element; it is not a question of faith, but a question of choice. Hopefully, the question before the client is not whether to invest or not, but where to invest. Naturally, by serving the customer with mutually exclusive solutions, where there is the guarantee that one will pay, will enable to retain that customer - as opposed to see him/her turning away somewhere else to look for an investment solution that suits his/her view.

What makes this range appealing to the retail investor? Is it the fact that investors can express their views?
The suitability for investment resides in the fact that an investment is made not because there is nothing else to invest on but because there is a market view that can be explicitly put into practice. From this point of view, a successful 'bet' will have a sweeter taste because it stems from a personal choice.
From an issuer point-of-view, it has been increasingly difficult to have any solid views on market trends as [the market] has grown directionless. Hence, a diversity of views has been growing, each of which gaining a material weight justifying addressing them with an investment such as the solution we have proposed.

How do you explain the success of this range?
The main distinction of these products vis-à-vis what we could call otherwise the traditional structure product offering, is not the product itself (it still holds the capital guarantee feature and the return payout potential) but how the relationship between the client and the bank gains a new dynamics, that is, it releases the bank from justifying the merits of a directional investment, opening the possibility for a richer exchange of viewpoints between the client and the account manager not any longer on the merits of the investment, but on which investment better fits the client's view.

Which option within the 'Up, Down and Stable' range has been the biggest driver of sales?
We have witnessed a balanced investment on each of the Up/Stable/Down versions of the product, which indeed supports the claim that there is a diversity of views amongst the retail client. If by performance it is meant the full and balanced placement success amongst the two (or three) products, we trust the solution has met the investor expectations.

Has this range exhausted its appeal among retail investors?
There are currently no reasons not to continue to provide these products as an investment solution to our client base, and there are several vectors under which the solution can be expanded.
According to SRP data, since 2013, 41% of the total products issued by Caixa Geral offered two/three options and have sold €200.15m. All of them are wrapped as deposits, and 35% of the products are linked to FX rates, 30% are linked to single indices, and 17% and 13% are for commodities (equal fraction of Brent Crude Oil and Gold) and Euribor, respectively. Five percent of the total amount of products were linked to the exotic S&P GSCI Coffee Dynamic Roll Index ER. Ninety-two percent of products are structured as digital, and the rest are range products.

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