SRP Apac 2025: beyond structured notes

The choice of wrappers has been viewed negligible by most of retail and high-net-worth investors in Asia where discussions tend to revolve around payoffs for structured notes, notably knock-in and knock-out (KIKO), according to Zhenzuo Ye (pictured), head of cross asset structured solutions, international wealth management at Nomura.  

We see more and more family offices, multi-family office and small, medium sized asset managers emerging up in this market that’s fast growing - Zhenzuo Ye

It has become noticeably more important in the past few years as the market welcomes more options that are potentially more efficient, such as actively managed certificates (AMCs) that typically require a smaller minimum ticket of US$50,000 to US$1m for a bespoke strategy.

“We see more and more family offices, multi-family office and small, medium sized asset managers emerging up in this market that’s fast growing,” said the Hong Kong-based private banker who most recently joined from Société Générale’s corporate & investment banking.

_{Left to right: Amélié Labbé, SRP (moderator); Pedro Moura, Schroders; and Zhenzuo Ye, Nomura IWM}

Ye recalled his first encounter with AMCs about a decade ago on the institutional side when they were used for a segregated type of account with cash bonds or equity underlyings.  

The clientele has evolved and expanded over the past five years with external asset managers (EAMs) taking a fresh step to replicate smaller hedge funds which require more sophisticated underlying and payoffs. 

Another example is repackaged notes, which are backed by cash flows arising from existing debt or equity security that the special purpose vehicle (SPV) has acquired.

“They can help [issuers] to accommodate various type of investors and improve capital structures, for which investors are willing to pay a higher fee,” added Ye.

Ye also pointed to a rising popularity of option-based strategies among mass retail investors, in particular covered call exchange-traded funds (ETFs).

Pedro Moura, head of Asia client solutions at Schroders, agreed that wrappers are not historically on the discussion table, even for many asset managers.

“People tend to think asset managers’ role is to select the best assets and design an investment strategy, forgetting that the delivery of that investment strategy, is as important as the strategy itself,” he said.

Option-based mutual fund or ETF are a traditional fund route used to distribute and to access investment strategies that offer exposure to structured products.

“Interestingly we also see a blurring of the borders coming from traditional structured product delivery format, which would be written on benchmark index, now linked to managed indices deployed with quantitative investment strategies (QIS),” said Moura.

There are a number of governance considerations. “If I buy an autocallable note, I have to think about which ones to buy, and I’ll have to renew them myself or my private bank. If I buy a fund, it auto renews itself,” added Moura.

The levels of yield expected by private banking clients in Hong Kong SAR and Singapore tend to be higher than those in Europe, added Moura.

_{Left to right: Amélié Labbé, SRP (moderator); Pedro Moura, Schroders; and Zhenzuo Ye, Nomura IWM}

Nomura’s Ye added that new product features could also contribute to a broader adoption across wrappers, such as intraday execution which has gained traction amid increasing market uncertainty and geopolitical tensions.

“Nowadays you’d see some fancy AMC execution portals that allow you to do intraday trading. Some can even just direct your orders to the market real time and give you the live feed of the market executions,” said Ye.

Lastly, Moura sent a caveat that the industry should not “do innovation for innovation’s sake”.

“Finding the right balance between delivering new structures, but at the same time having appropriate guardrails that don't stifle innovation, make sure that the system remains robust and doesn't have adverse impacts or unforeseen behaviours in periods of crisis,” he concluded.

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