In the second part of an interview, Vivek Sharma (pictured), head of South East Asia and Middle East-global asset management and former head of structured products & investment advisory at Edelweiss, talks about the company’s activities in local structured products for retail investors.
Are retail investors in India aware of structured products? Is there a lack of education around these products?
India is experiencing growing levels of affluence and financial education. These two elements provide a very good base to boost structured products. It’s a matter of time and regulation, as the investment audience is already there. The economy is doing reasonably well and younger generations are willing to participate and invest. It will take some time, but the Indian market has all the ingredients and the appetite for these products to meet people’s investment and saving goals. There is also a desire to bring products to market that are a bit more sophisticated and innovative, as investors are using them in other asset classes. There is a lot of potential around this product category, but it has not received the attention it deserves.
What is Edelweiss’s activity in the local structured products market?
We bring new products to market on a monthly basis and have developed a range of products that, over the last five to six years, have shown they can perform and provide good returns to clients. We remain committed to this product category and are hoping new regulation will allow us to increase our offering and expand our range with new instruments, underlyings and payoffs. We have seen that in other markets structured products are very flexible and can be used for different goals, such as capital preservation, but also to get leveraged exposure and even capitalise on sideways and falling markets. We are also creating products around fixed income and commodities, as demand for these asset classes is strong in India. Given the scope of regulation in India, we try to be as active and innovative as possible. We will continue to work with private banks and wealth managers, and are also developing education activities for investors based on how these product can fit in their portfolios or be used for asset allocation as well as engaging with regulators and partners. There’s a lot of potential around institutional investors, and we can also capitalise on the appeal of the Indian market to provide access to foreign investors.
What plans do you have for new services, products or markets?
In India, Edelweiss has the capability to build and distribute its own products. We are also evaluating various means to offer these products to offshore investors. Our expansion to other markets is part of our efforts to make this product category more meaningful, and use it to provide access to the Indian market. We are exploring opportunities in other markets to build products that offer exposure to India’s equity and fixed income markets.
How does Edelweiss differentiate itself from competitors?
We have been one of the few players in India to have a consistent structured products offering for the last five to six years. Our partners and clients know that we are committed to the market for the long haul. We have also tried to bring to market innovative products, based around indices and stocks.
What are the rules on suitability?
The Indian market has not been exposed to the scandals seen in other markets. We are at a good starting point to increase the size of the market in an orderly manner, tackling suitability and transparency without diminishing opportunities. It is true that some investors are aware of the bad press around structured products, but we have strong sales processes to make sure that suitability checks are done before advising clients on any of our structured products.
What’s your forecast for the Indian structured products market?
There is still a lot of work to do to have a fully developed structured products market in India. However, investors are becoming more sophisticated and are demanding products that can address particular needs. Structured products are one of the best investment solutions out there, as they can be tailored not only to achieve different investment goal,s but also to meet the risk profile of different types of investors. Indian investors have also more capital to invest and the appeal of being able to participate in the capital markets and other asset classes with some kind of protection is also driving demand. The Indian market will continue developing and we hope that it will also become an interesting market for foreign providers in the short term.
Edelweiss has a 38.4% share of the INR6.5bn (US$100m) outstanding volume in the market this year. The Indian asset manager was recognised by SRP with an award for being the Best Private Banking Solution at the Asia-Pacific Structured Products and Derivatives Awards 2015, which took place on September 22 in Hong Kong.
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