SG: higher rates reignite capital protection as French investors return to equities

According to Société Générale, investors are increasingly seeking ways to balance fear of missing out on market gains with concerns around valuations and geopolitics, creating fertile conditions for both equity-linked and rate-linked structured products.

Equity structured products are a very relevant way to get exposure to global equity markets in a context of geopolitical uncertainty - Charlotte Giacomel

While equities have long dominated the French structured products landscape, the market backdrop has shifted significantly over the last two years. Higher volatility, elevated interest rates and geopolitical uncertainty have changed the way investors use structured products, but not their preference for equity-linked solutions.

According to Charlotte Giacomel (pictured), managing director and head of sales for cross-asset solutions distribution in France and Benelux at Société Générale Corporate and Investment Banking, demand for equity-linked products has strengthened since late 2023.

"Speaking for France and Benelux, we have seen renewed interest in equity-linked products since late 2023 and the beginning of 2024," she says.

From a structuring perspective, the environment remains supportive. Volatility continues to create attractive option pricing opportunities while interest rates remain sufficiently elevated to support more appealing product economics.

For investors, structured products provide a way to maintain exposure to equity markets without taking on full market risk.

"Equity structured products are a very relevant way to get exposure to global equity markets in a context of geopolitical uncertainty and possibly elevated valuations," says Giacomel.

She notes that one of the key strengths of structured products is their flexibility. Depending on investor objectives, products can be designed to express bullish views, generate income, navigate range-bound markets or provide defensive exposure.

We focus on well-diversified underlyings and structures that can offer downside protection and in some cases capital protection - Charlotte Giacomel

That flexibility is increasingly important as investors attempt to reconcile concerns over market valuations with the desire to participate in further equity upside.

According to Giacomel, clients are increasingly favouring diversified underlyings and structures that reduce concentration risk while incorporating some form of downside protection.

"We focus on well-diversified underlyings and structures that can offer downside protection and in some cases capital protection at maturity," she says.

For investors reluctant to take outright equity exposure, structured products provide a more measured route into the market.

The result is a growing use of structured products as portfolio management tools rather than purely return-seeking instruments, allowing investors to stay invested while managing uncertainty in a controlled manner.

Capital protection returns

The biggest structural shift in the French market has been driven by interest rates.

Before the European Central Bank's tightening cycle began in 2022, structured product issuance in France was overwhelmingly concentrated in non-capital-guaranteed equity structures.

"The rate hikes in 2022 reshaped the French market," says Giacomel. "Before that period French structured products were almost entirely equity based with long exposure and very little capital guarantee."

She recalls that approximately 95% of issuance volumes were concentrated in non-guaranteed equity structures.

Higher interest rates have transformed that landscape.

The return of positive yields has allowed issuers to rebuild capital-protected products that were largely uneconomic during the era of ultra-low rates. It has also created opportunities for a broader range of interest rate-linked investment solutions.

According to Giacomel, this has attracted new pools of investor capital that historically flowed into traditional savings products, real estate investments and euro-denominated insurance funds.

As a result, the French market has become more diversified from both a product and asset allocation perspective.

Capital-guaranteed and rate-linked structures have become a major growth area for Societe Generale.

"They have become a very strong axis for us," says Giacomel, noting that the bank has maintained a leading position in nominal issuance volumes in the segment since 2023.

The firm's success has been driven not only by pricing competitiveness but also by investments in automation and technology.

According to Giacomel, automation has become essential in today's structured products market, particularly for products whose economics are highly sensitive to interest rate movements.

"These rate-linked and other sensitive products require very fast reaction times," she says.

Societe Generale has automated much of the issuance process, allowing distributors to obtain pricing, term sheets, key information documents and marketing materials within seconds.

The technology infrastructure enables the bank to process large volumes efficiently, particularly during periods of heightened market volatility when investment opportunities may only exist briefly.

On weeks characterised by sharp moves in interest rates, Giacomel says the platform's speed has enabled distributors to execute numerous smaller transactions quickly, helping investors capture market opportunities as they arise.

Beyond equities and rates

Despite the growth of rate-linked products, equities and interest rates remain the dominant asset classes in France.

Other segments, including foreign exchange, commodities and credit, continue to represent a relatively small share of structured product issuance.

Foreign exchange products have enjoyed significant success in some international markets, particularly in Asia, but French demand remains more limited.

"FX-linked products remain a more limited and distribution-driven market compared with equities and now rates," says Giacomel.

Nevertheless, she sees significant potential for growth.

Societe Generale has already executed capital-protected foreign exchange-linked private placements, including structures linked to the euro-dollar exchange rate, and hopes to broaden investor adoption over time.

Commodities face additional challenges due to the structure of the French retail market.

A significant proportion of structured product distribution takes place through life insurance wrappers, which can restrict the use of commodity-linked exposures.

As a result, while investors express interest in themes such as gold or hybrid equity-and-gold solutions, commodities remain a relatively niche segment.

Credit-linked products face a different challenge, according to Giacomel.

French insurers are highly familiar with credit markets through their balance sheet management activities, but end-investor demand remains limited.

"The issue is not their knowledge but the current level of end-client demand," she says.

She believes credit offers genuine diversification benefits but acknowledges that many retail investors still perceive the asset class as complex.

The contrast with Nordic markets is striking. In countries such as Sweden and Finland, credit-linked structured products are widely accepted and form a core component of issuance activity.

That divergence highlights how investor preferences remain heavily influenced by local market culture and distribution practices.

Looking ahead, Giacomel expects both equity-linked and capital-protected products to remain key growth areas throughout the remainder of 2026.

The tension between investor optimism and investor caution is likely to continue supporting demand.

"We expect equity demand to pick up further compared with last year," she says.

Investors remain attracted by equity market performance but are simultaneously concerned about geopolitical developments and valuations.

For structured products, that combination creates a compelling opportunity.

Products that combine participation in market upside with some form of downside protection are increasingly viewed as a practical solution to this dilemma.

Capital-guaranteed products are expected to play a particularly important role.

"They are at the heart of the response," says Giacomel.

After years in which full capital protection was largely absent from the market, higher rates have made these structures economically viable once again.

In many ways, she suggests, the return of capital protection feels like an innovation in itself.

For French investors navigating a market defined by both fear of missing out and fear of loss, the ability to participate while preserving capital has become one of the most attractive propositions in structured products today, concluded Giacomel.

This is an abstract of the SRP Asset Class Report 2026 which is available for download here. 

_{Image: GoodPics/Adobe Stock}

---

Do you have a confidential story, tip or comment you’d like to share? Contact Us | SRP (structuredretailproducts.com)