Olden Lane Securities and Axio Financial have formed a distribution partnership through which the latter will distribute the former's target outcome funds range to independent broker-dealers, wirehouses and registered investment adviser channels in the US.

Olden Lane is offering structured unit investment trusts (Suits) with a range of target outcome funds, a new category of UITs developed by Olden include 'simple, transparent and cost-effective solutions' for hedging the returns of some of the most popular exchange-traded funds (ETFs) over a specific time period, according to the company. Following the launch of the distribution partnership with Axio, SRP spoke to Michel Serieyssol (pictured), chief executive officer of Olden, about the increased number of players entering Suits and how the new category of UITs could take market share from structured notes.

An investment company wrapper offers several advantages over a structured note, including the ability to substantially mitigate credit risk, daily reporting of mark-to-market valuations and daily redemption rights at net asset value, according to Serieyssol. "The 1940 Act also provides a disclosure regime that results in a transparent illustration of a product's composition and embedded costs," said Serieyssol. "The unit investment trust offers an attractive vehicle for some of the hedging strategies traditionally packaged in a structured note.

"It's reasonable to think that UITs may take some market share from structured products over time, but we think the more important point is the potential of UITs to expand the universe of investors employing defined outcome strategies," said Serieyssol. "Issuance last year marked one of the lowest levels in the past decade. Meanwhile, the demand for other investment products designed to protect against significant negative returns has increased substantially."

The expansion of alternative strategy mutual funds and ETFs demonstrates the appetite, while Target Outcome Funds "represent a practical risk management tool in a friendly investment company wrapper, which provides reliable protection against market declines with competitive fees and return features that are predictable and easy to discern", according to Serieyssol.

Olden has identified education as critical and differentiating. "There is a general consensus among investment product developers that defined outcomes have convincing utility and offer real potential as an important aspect of future investment management," said Serieyssol. "But, defined outcomes remain unfamiliar to all but a small number of investors and a great deal of education is necessary to explain their most useful applications. We are very focused on a programme of educational materials to unfold these concepts."

Olden intends to increase in size through partnerships with distributors, according to Serieyssol. "We will continue to work with partners to educate financial advisors and their clients, major wealth management networks and regulators," said Serieyssol. "Electronic platforms are gaining momentum and offer not only distribution support, but also substantial educational material to ensure advisors understand the features and appropriate application of the products," said Serieyssol. "

The partnership with Axio follows Olden's distribution agreement with JVB Financial Group earlier this year. Olden entry to the UIT world follows the launch of Alaia Capital's Market-Linked Trust platform, in February 2017, and the launch of a distribution partnership with Incapital in October, as well as a number of developments by CBOE Vest which filed the first Suit, which was marketed at the end of 2016 as the CBOE S&P 500 Buffer Protect Index Balanced Series.

Olden beefed up its product design and distribution capabilities with the appointment of Sam Rosenberg, former managing director and head of equity derivatives sales, Americas,at Natixis, who joined as a managing director in New York.

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