VDK Bank and Societe Generale have joined efforts in Belgium to target the elderly, the fastest growing population group in the world. The Flemish bank is distributing two structured notes, each with different terms, linked to the Solactive Silver Age Index, a new thematic index reflecting the performance of companies who will potentially benefit from the ageing population in Europe.

This group will make up almost a quarter of the population by 2030 and, in countries such as Germany and Italy, more than 36%, according to SG Cross Asset Research.

The option is to choose products or indices that have a broad spectrum, such as a European or global equities index, or a more thematic index, according to Thomas De Nil (pictured), head of product management investments and ALM portfolio at VDK Bank. "In the latter case, it is also important, given that these products have a longer duration, of five, eight or sometimes even 10 years, that you choose themes that have potential in the long term," said De Nil.

The index is calculated and published by Solactive and was launched on June 6, 2017. Its 30 components are selected based on their fact set industry, from a universe of 675 European stocks that make up the Solactive Europe Total Market 675 Index.

"Obviously, the aging population, because that's where the index responds to, the criteria are built on that," said De Nil. The index targets a selection of companies that benefit from an aging population and the increase in life expectancy in Europe, coupled with financial criteria of dividend and volatility, according to De Nil. "The aging of the population is, of course, a long-term trend in which products with a longer investment horizon fit nicely."

There are two versions of the product, Autocallable Silver Age Note and 90% Autocallable Silver Age Note, both of which are issued via the SG Issuer vehicle with Societe Generale as the guarantor. The former protects the full capital invested and has a maximum investment term of 10 years, providing there is no autocall, while, with the second option, investors could lose up to 10% of their investment, although, at five years, the investment period is much shorter.

"We have also launched a second product on the same index, for when we advise our clients, to be able to judge which option it the most suitable, or what product the customer prefers to buy and it gives customers the opportunity to decide what he or she thinks fits best in their own risk profile," said De Nil. "And, of course, because the products have a different investment term, some clients might find it interesting to use a slightly shorter investment horizon."

VDK has chosen for the autocallable as a diversification in payoffs, because it is a structure the bank does not often use for its retail offerings, according to De Nil. "This structure offers the advantage that, in the case of an autocall, effectively a coupon is paid out and the entire capital invested is then repaid to the investor," said de Nil.

The aging population theme is neither new in structured products nor Belgium. Between October 2009 and August 2011, Argenta marketed five structured products linked to the Global Grey Gold ER Index, while, between March and July 2015, BNP Paribas Fortis distributed four products, also in Belgium, linked to the Global Grey Gold Select 30 Index. Both indices were developed by BNP Paribas to provide stock market exposure to companies whose activities are largely supported by the aging population of this world and whose product range is mainly focused on this category.

Click the link to view the Solactive Silver Age Index  guideline and latest  factsheet.

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