DB says credit is entering a new phase as structured products diversify

According to Deutsche Bank, credit-linked products, rate-based structures and cross-asset solutions are gaining momentum as investors prioritize yield, customisation and transparent risk-return profiles.

Equity-linked products offer a high level of flexibility and optimisation, they are intuitive to investors and widely covered by issuers - Maelle Guerin

Despite the resurgence of fixed income markets and growing investor interest in diversification, equities continue to underpin the majority of structured product issuance globally.

For Maelle Guerin, structured products sales at Deutsche Bank, the explanation extends beyond traditional structuring advantages.

"Equity-linked products offer a high level of flexibility and optimisation, they are intuitive to investors and widely covered by issuers," she says.

Yet while these characteristics help explain their popularity, Guerin believes investor behaviour remains an equally important factor.

"I don't think this explains their dominance fully. Familiarity and past experience still drive a part of the decision."

According to Guerin, equities have become deeply embedded in the structured products ecosystem. Investors understand the asset class, distributors are comfortable explaining it and payoff mechanisms built around equity markets have become well established over decades.

That familiarity creates a powerful feedback loop that reinforces demand even as other asset classes become increasingly attractive.

"Equities are embedded in investor behaviour," she says. "Clients understand them, distributors are comfortable selling them, and payoff mechanisms built on equity markets are well established."

The dominance of equities is particularly striking given the size of global fixed income markets.

By many measures, fixed income represents a larger and more scalable asset class, offering investors more predictable risk characteristics and a broader investable universe. Yet structured products have historically been associated with equity risk, limiting the adoption of alternative asset classes.

Guerin believes this dynamic is beginning to change.

As interest rates have normalized, fixed income structures have become easier for investors to understand and easier for distributors to position within portfolios. Nevertheless, equities remain the industry's default setting.

"Equity remains the default — it is familiar, versatile, resilient and deeply ingrained in the structured product ecosystem," she says.

Rather than a wholesale shift away from equities, Deutsche Bank expects a more balanced market in which additional asset classes gradually gain relevance alongside traditional equity-linked solutions.

Higher rates fuel innovation

The return of higher interest rates has transformed structured product design across asset classes.

According to Guerin, it is not only the level of rates that has changed the market, but also the persistence of elevated rate volatility.

"Higher rates have been a game changer, but it is the combination of elevated levels and persistently high-rate volatility that has really reshaped structuring," she says.

The return of carry has improved product economics significantly. Issuers can now offer higher coupons, stronger protection levels and simpler payoff structures without relying on aggressive optionality.

This environment has supported the revival of capital-protected products, callable structures and more conservative income-focused solutions, bringing structured products closer to traditional fixed income allocations.

At the same time, elevated rate volatility has enhanced the value of embedded options within callable and range-accrual structures.

According to Guerin, Deutsche Bank has expanded its suite of rate-linked products to capitalize on this opportunity, incorporating features such as autocallability, coupon deferrals and range accrual mechanisms.

The bank is also seeing growing momentum in credit-linked products.

"Credit-linked products are gaining momentum because they are an efficient way to enhance yield in today's market," she says.

Higher base rates and wider spreads have made credit risk easier to understand and more attractive to investors seeking incremental income.

What is changing, however, is how investors are using credit.

Rather than viewing credit exposure as a standalone allocation, clients increasingly incorporate it as a yield-generating engine within broader structured solutions.

Hybrid structures combining credit with equity, interest rate or foreign exchange overlays are becoming more common as investors seek greater customization and more efficient risk-return profiles.

"Clients increasingly use credit as a core yield engine, combined with equity, rates or FX overlays to fine-tune risk and boost coupons," says Guerin.

The trend is supported by ongoing developments within credit markets themselves.

The launch of new benchmarks such as the CDX Financials index is improving liquidity and standardization, helping credit evolve into a more scalable and versatile component of structured product portfolios.

Deutsche Bank has invested heavily in this segment and was recognized earlier this year with the SRP Award for Best Issuer – Credit.

The bank's broader credit franchise provides the foundation for that activity.

Among Europe's largest liquidity providers, Deutsche Bank trades more than €20 billion per week across investment grade and high-yield credit markets and maintains leading market positions across electronic credit trading, credit derivatives and distressed debt.

Within structured products specifically, the bank issued approximately 600 credit-linked securities in 2025 for a notional value of US$2 billion.

Its repackaging platform also continues to expand. During 2025, Deutsche Bank-issued special purpose vehicles brought 98 securities to market with a total notional value of US$5.5 billion, including a US$2 billion transaction that the bank describes as the largest repack issuance completed to date.

Hybrid solutions gain ground

While credit and rates are attracting increasing attention, other asset classes continue to play a more specialized role within structured products.

Foreign exchange and commodity-linked products remain relatively small segments of overall issuance, largely because investor demand tends to be tactical rather than strategic.

"Demand for FX and commodity-linked products is typically tactical rather than strategic and requires a clearer investor conviction," says Guerin.

As a result, these asset classes are often used opportunistically around specific market views rather than as core portfolio building blocks.

Deutsche Bank continues to offer a broad spectrum of commodity-linked solutions ranging from yield-enhancement strategies linked to energy and industrial metals to more strategic smart-beta commodity exposures.

Within the commodity universe gold remains a notable exception.

"Gold is the clear exception," says Guerin. "We have seen consistent demand for gold-linked structured products, typically positioned as a defensive asset and portfolio diversifier."

The ability to scale any structured product strategy ultimately depends on practical considerations including funding costs, liquidity and balance sheet efficiency.

According to Guerin, these factors play a decisive role in determining which underlyings become widely adopted.

"In reality, the structures that get issued are those that fund cheaply, hedge cleanly and scale repeatedly," she says.

This helps explain why highly liquid equity indices, rates markets and investment-grade credit continue to dominate issuance volumes.

The key is not necessarily the asset class itself, but whether the underlying instruments support efficient hedging, competitive pricing and scalable issuance.

Looking ahead, Deutsche Bank expects the market to become increasingly diversified.

Credit-linked products, rate-linked structures and hybrid solutions are all expected to gain market share as investors continue to prioritize income generation and yield enhancement.

Equities, however, are unlikely to lose their central role.

Instead, the focus within equity-linked products is expected to shift toward more defensive and income-oriented strategies as investors navigate an environment characterized by higher rates, geopolitical uncertainty and evolving macroeconomic conditions.

For Guerin, investor education will play a critical role in determining how quickly this diversification takes place.

As investors become more familiar with alternative asset classes and hybrid structures, adoption is likely to broaden.

The next phase of structured product growth, she argues, will not be defined by replacing equities, but by building more transparent, balanced and customizable solutions around a wider set of return drivers.

The result is a market gradually moving beyond its historical equity roots toward a more diversified, multi-asset future.

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

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