Halo: market vol, a driving force for platforms

SRP caught up with Biju Kulathakal (pictured), chief executive officer of the global structured products platform, to discuss teething issues that pop up from an influx of client demand, the company’s competitive position and trajectory in 2020, as well as opportunities for growth.

Can technology cope with demand at times when unexpected events push greater adoption of these tools?

Biju Kulathakal: We’re getting a lot of inbound interest from people who want to trade with us. In a volatile market such as this, everyone wants to go through a platform – this basically shows why marketplace platforms are really important. Our platform allows investors to price and purchase structured notes much more quickly than previously manual processes. The platform also manages the full lifecycle of these investments, which has often been a difficult, time-consuming task for investors.

In terms of driving adoption, March was our busiest month ever in terms of trading volume. This came with the challenge of Halo and most of our clients working from home due to the coronavirus. We’re having both team and firm-wide video conferences every day and haven’t missed a beat. Halo’s platform is an extension of our sales team in the field, so while we’re unable to travel to visit clients, we’re still able to get the job done. Halo clients also have the ability to access the platform on any browser with an internet connection. So, in that respect, the technology has been readily adopted given the unexpected circumstances.

What activity has flowed through the platform in the past year?

Biju Kulathakal: We’re happy to see that activity in both the US and internationally has grown quite a bit. We have a significant amount of activity in Europe, South Africa, the Middle East and Southeast Asia. Generally, we see the most growth in the US, which accounts for about one-third of our business. In the US, we’re seeing the most activity from the independent investment advisor community [RIAs].

Fee-based advisors are interested in growth notes with protection mostly linked to broad equity indices that complement core portfolio allocations

There has been a lot of activity in the RIA community for a couple reasons. First, a lot of brokerage reps are leaving wirehouses and going independent. Many of these advisors are familiar with and want to use structured products for the portfolio risk benefits. Halo improves upon the infrastructure for the products they’ve used at the wirehouses. This platform infrastructure also makes it easier and quicker to evaluate and invest in structured notes. Secondly and most importantly, we know that people want transparency. They want to know that they’re getting a fair price and that they can track and analyse the lifecycle of the product. Advisors are always looking to provide responsive solutions to meet clients need while also reducing costs. This is what Halo’s platform for structured products can offer. These are just a few of the reasons we’re seeing a lot of interest and demand from advisors.

Where do you see more opportunities for growth?

Biju Kulathakal: Our growth is coming from all over the world with a focus on Europe. We’re newer to this market but initial results have been promising and we see this rapidly continuing. We also detect an opportunity to expand into the Latin American market though we have no official plans yet.

What kind of structured products are being transacted? What are the underlyings?

Biju Kulathakal: Our clients are buying a variety of payoff types and underlyings. Fee-based advisors are interested in growth notes with protection mostly linked to broad equity indices that complement core portfolio allocations. US brokerage and international clients have been more focused on income notes linked to both single name stocks and indices. In a market such as this, they want to take advantage of the attractive yields from heightened volatility and gain more protection for less

In terms of annuities, it’s the smallest part of our business right now. We see a big growth opportunity in this market and are focused on launching annuities on the platform later this year. We have a bunch of different carriers who are interested in putting their product on our platform. We’re also growing our sales force to support the expansion across more protective investment products.

Where do you see yourselves in relation to your competitors?

Biju Kulathakal: We’re the only independent structured notes platform that’s surviving and thriving in the US. In terms of RIAs, we are the leader compared to other platforms. In the broker-dealer space, we end up competing with Simon occasionally, and we’re still new in that space so we see our efforts growing considerably. Internationally, Swiss platforms like Leonteq and Vontobel are retrenching from Southeast Asia where they’ve tried to make a push.

Are there any takeaways from the current market environment?

Biju Kulathakal: This is an unusual time in the market, but it has really proven the need for structured products because clients want protection. There are few other ways to get these levels of downside protection and the opportunity for upside returns or income when the markets are so unpredictable. Additionally, after the market volatility from Covid-19 settles down, structured products could be a more fundamental piece of portfolios for their flexible protection and return options.