Deutsche Bank has collaborated with Goldman Sachs for the launch of Europe Optimal Timing 2027 in Belgium. The 10-year capital protected note offers 100% participation in the positive performance of the Stoxx Europe Select 50 EUR Index, capped at an overall maximum return of 160%.
The product has an 'optimal timing' feature which makes it interesting for investors who want to participate in the stock markets but are unsure about when to step in, according to Christophe Blontia (pictured), senior product manager at Deutsche Bank in Brussels. "The initial value of the index is calculated as the lowest point of four observations taken over a period of three months which obviously has an advantage compared to a product where the strike date is fixed," said Blontia.
Ideally you would get the lowest level of the index of the next two years but that would make the product too expensive, according to Blontia. "We have a considerable period of four observations to determine the optimal entry point and at the same time we are able to offer the client a good upside potential," said Blontia.
The product is issued via Goldman Sachs International and daily liquidity is provided by Deutsche Bank in Brussels. It is the third time in as many months that Deutsche Bank has distributed a structured note for which Goldman acts as the counterparty; the previous two products, Europe Callable 2025 and Europe Callable 2026, struck at the end of October and the end of November, respectively.
"We offer open architecture. Our clients can choose from a number of issuers to diversify the risk in their portfolio," said Blontia. "We are continuously looking for creditworthy issuers for our customers. Goldman Sachs is a relationship we have redeveloped this year. Not many of our clients have exposure to Goldman, so for them it is interesting to add a bank with a good A/A1 rating to their portfolio."
Deutsche Bank is currently the only provider in Belgium using Goldman as counterparty for its structured products, according to Blontia. "We always try to do our own thing when it comes to issuers," he said. "We make analysis of what we think could be good issuers for our clients. We always try to be ahead of the other distributors, especially with the focus on open architecture."
The 100% capital protection offered by the note - after 10-years of investment - fits in well within the investment profile of many of the bank's clients, who prefer full capital protection, according to Blontia. "People still want to build in a certain security. On the one hand they want to have exposure to the stock market, which they have with this product, but at the same time they don't want to take too much downside risk because they are scared the stock markets could crash," said Blontia.
"The greatest demand from our clients is still for products with a 100% capital guarantee denominated in euro. The full capital protection is important for our clients, also psychologically."
Deutsche Bank has distributed 48 structured products worth an estimated €370m in Belgium this year. The products, which are linked to funds (20), equities (15), interest rates (12) and FX rates (one), were issued via seven different counterparties including Citigroup, Credit Suisse, Deutsche Bank AG, Goldman Sachs, ING, Natixis and Societe Generale.
Last year the bank distributed 38 structured products (€406m), in collaboration with five counterparties, linked to the same asset classes, although back then the vast majority of products (28) were linked to funds, with the remainder linked to equities and interest rates (four each) and FX rates (two).
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