Commerzbank has launched its first bonus certificates in the Netherlands. The German bank issued four certificates, each with a duration of 21 months, linked to the local AEX index and the Eurostoxx 50, respectively.
The move follows the introduction of the bank's twin win certificates in July and more new product lines could follow, according to Christophe Cox (pictured), assistant vice president, derivatives public distribution Belgium and the Netherlands at Commerz. "We are looking to issue other investment products too, mainly products which are doing well in other markets. Think France and Germany," said Cox. "We are always on the lookout for new opportunities, while, at the same time, we will continue to update the product lines we have recently introduced, such as the bonus and twin win certificates, by adding new underlyings."
Bonus certificates, which provide a fixed minimum return providing the underlying asset has not traded below a certain threshold during the lifecycle of the product, allow the investor to respond to financial markets where there is not much movement. "Given the current evolution of the markets we think this is a suitable product for those investors who don't expect the markets to increase much further," said Cox. "Imagine the market continues to move sideways for the coming period, then, with these products, you will be able to add additional yield to your portfolio."
However, investors must be aware that they don't receive dividends paid by the underlying, according to Cox. "In exchange for loss of dividend there is a conditional minimum return," he said.
Whereas other providers in the Dutch market, such as BNP Paribas and Kempen, have in recent months launched bonus certificates with a cap, Commerz has gone for the uncapped variety, the classic bonus certificate. "With these products, you don't only profit from an increase in the markets but also in case of stable or slightly declining markets," said Cox. "Once the lower limit has been hit, the product becomes a regular investment which tracks the performance of the underlying, without the dividends, and you can still achieve a positive result."
The first series of bonus certificates were linked to the Dutch and European benchmark indices, although future products should see a wider choice of underlyings with Commerzbank looking to add shares to its offering, according to Cox.
As the liquidity provider of the bonus certificates, Commerz advertises bid and offer prices, also known as the spread. "The spread for the certificates on the Eurostoxx 50 is 0.5%, while the spread on the AEX certificates, at 0.33%, is slightly more competitive," said Cox.
"We put these products in the market as investment products, which means, if the investor holds on to the product until maturity, he gets paid the value of the product," said Cox. "So, you actually pay half of the current spread, because, at maturity, you no longer have to sell. That's important."
Commerz's bonus certificates are listed at Euronext Amsterdam and available via banks and brokers.
Structured products can be very interesting but not many investors know how to deal with them, Tak
Commerzbank re-introduces twin win in the Netherlands, more investment products to follow
Commerzbank: gold linked turbos in demand, impact speculation tax difficult to measure