Deutsche Bank's Xmarkets has launched a set of open-end trackers and leverage certificates linked to the Fang (Facebook, Amazon, Netflix, Google/Alphabet) performance index, a new index launched in collaboration with ICF Bank on February 17.
"The index was especially developed for issuing an index certificate and to make this investment story available for private investors", said Nicolai Tietze (pictured), director at Deutsche Bank. The main characteristics of this equity index is that it "offers transparency, where all shares are equally weighted and no management fees are applicable."
The index sponsor is ICF Bank which is responsible for the design, calculation and composition of the index which is calculated in euro. "Demand for proprietary indices is driven by themes that are easy to understand for investors and to bring to market," said Lars Lautenschläger, managing director at ICF Bank. Shortening indices is not the best way to build indices as it is more difficult to explain to investors, according to Lautenschläger. "Factor indices are driving significant demand from SP providers and we have licensed several since the end of 2012, especially factor indices with different leverages on gold, DAX and especially oil to providers like HSBC and Deutsche Bank."
The 13 new products linked to the Fang index include Wave XXL Call and Wave XXL leverage certificates and the FANG-Index X-pert Zertifikat. Deutsche Bank has already issued factor certificates on leveraged indices successfully with ICF Bank. "We wanted to intensify our cooperation with this equity index," said Tietze.
Deutsche Bank is not planning to issue more structures on this underlying, according to Tietze. "We are planning to issue more theme index certificates this year. Themes such as oil, the gold recovery and especially dividends in the low interest rate environment remain in focus," said Tietze.
According to Lautenschläger themes that were interesting last year such as stocks from companies involved in the internet, robotic and electronics will continue to be popular. "Self-driving cars is a topic that is becoming more interesting whereas mobile phone manufacturers like Apple or Samsung are becoming less interesting due to less innovation possibilities," said Lautenschläger.
Banks are looking at independent index providers to develop their proprietary indices because issuers of structured products do experience mistrust by investors when offering certificates linked to their own underlyings indices, said Lautenschläger. "We as independent index provider offer the entire service of providing ideas including the calculation of the indices so there is no conflict of interest from issuers selling certificates linked to our indices," he said. "This will be even more important when the Iosco 'principals of financial benchmarks' will be transferred into European law. Being a regulated securities trading bank, ICF Bank always had to live up to similar or even stricter rules and regulations and therefore we will be able to offer compliant services for the future," Lautenschläger added.
Click here to read the methodology of the Fang index.
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