The sales volume of structured products striking in Sweden fell by 53% over the first seven months of 2016, with the number of new issues down by 29% on the year, according to SRP data. "With the equity markets in roller-coaster mode, investors understandably become rather cautious," said Mikael Axelsson, chief executive officer at Garantum. "But, as we have seen during previous crises and difficult circumstances, structured products with their unique flexibility will continue to offer attractive alternatives tailored to investor needs and views.
"The Swedish structured products market will pick up again during the autumn and we will witness a strong growth in 2017," said Axelsson.
During July, 78% of products were linked to equities, 19% to credit and 4% were based on funds, with the most used single underlyings the OMX Stockholm 30 Index and the Markit CDX North America High Yield Index which both were used in three products. "Good investment themes are really few and far between these days," said Axelsson. "There is a lot of talk about commodities, but I am not so sure - maybe there is some upside near-term due to speculative flows.
"There will be more risk off ahead and, therefore, market neutral strategies should make a strong come-back very soon," said Axelsson.
Rollover opportunities in July were good, with 78 products worth SEK1.7bn (€176m) maturing during July. Of these, 20 offered returns above 5% pa. The best performer was Garantum's five-year Sprinter USA Export Räntebooster nr 990, which offers 278.94% (22.55% pa). The sprinter certificate was linked to 10 US shares and offers up to 350% of the rise and is the third best-performing product of 2016 so far.
"The buyout of Heinz by Buffet and 3G definitely helped both in terms of performance of the Heinz stock and by drawing investor interest to the sector as such," said Axelsson. "The spin-off of Mondelez from Kraft was probably less of a decisive event. We applied a drag to the basket in the form of three-month US dollar Libor (which we believed would stay subdued) and could, therefore, raise the participation rate to 320%. Since short-term interest rates remained low throughout the period, the product was bound to strongly outperform the underlying basket."
The second-best performer was from Nordea, with a four-year Aktieobligation USA Chans 3661B, offering 150.46% (10.75% pa). Two autocall products reached early maturity in July, with Erik Penser's Autocall Oljebolag 1548 Maximal the best-performer, offering 112% (11.44% pa) after a year and linked to a basket of four oil company shares.
Skandia was the most active provider, with eight products, although overall this year it has a market share of 4%. On shared first place are Garantum Fondkommission and Nordea, both having a market share of 22%. Swedbank was the leading bond provider, although all of its products were distributed through its own channels. The most active international investment bank was SG, with four products.
In July, 37% of products were uncapped calls, 19% linked to credit default, 15% each autocalls and sprinters, 7% fixed upsides, and 4% each capped calls and combination of portfolio insurance and uncapped call. "We still like autocallables and are constantly looking for ways of adapting and developing that structure," said Axelsson.
Over the month, 48% of products had no capital protection, 7% had partial protection, while 37% were issued at a price of 110%, and 7% offered a full return of capital.
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