Exane targets Irish investors with sixth tranche of fund-linked series

Exane has partnered with BlackBee - an Irish investment firm specialised in structured products - for the launch of Protected Funds 15, a three-year medium-term note linked to an equally weighted basket comprising two managed funds: Pimco Global Investors Series Income Fund (EUR) Hedged Accumulation and Jupiter JGF Dynamic Bond. The securities, which are listed in Luxembourg, protect 90% of the nominal invested and participate 210% in the positive performance of the basket, subject to quarterly averaging during the last two years of investment.

"It is clear that if we were to do a 100% capital protected product we would not be able to offer anything interesting, but dropping the protection to 90% does provide us with enough to fund a cheap option," said Jonathan Cohen (pictured), head of UK and Ireland family office coverage, cross asset investment strategies and bespoke solutions.

The product is the sixth tranche of the fund-linked note which has always featured the same underlying funds. "These funds were chosen based on their track record, the quality of the asset managers and their low volatility. This allows us to offer an option that combines a good performance potential and decent upside participation," said Cohen.

During the past five years funds have been among the dominant asset classes in Ireland, next to equities and, to a lesser extent, alternatives and credit. In 2017 there were 26 fund-linked products worth an estimated €121m introduced to Irish investors, according to SRP data. The products were issued, among other, via Bank of Ireland, BNP Paribas, Commerzbank, EFG International, Exane, Investec, Natixis and Societe Generale, respectively, with BCP Asset Management, BlackBee, Cantor Fitzgerald and Wealth Options taking care of the distribution.

Funds are popular in Ireland because they offer access to a variety of markets, with diversification and within a strong regulatory framework, according Cohen. "More importantly, they are instruments that are well known by and marketed to retail investors," he said.

Simultaneous to the launch of Protected Funds 15, Exane has also introduced the Gold Twin-Win - its eight Twin-Win in Ireland - which is linked to the shares of Yamana Gold and Tahoe Resources. Both products have the same investment term (three-years) but whereas Protected Funds 15 offers 90% capital protection the Twin-Win puts full capital at risk with the return tracking the worst performing of the two underlying shares if they close below 60% of their respective strike level on July 13, 2021.

Cohen noted that the Irish retail investor "is keener on capital protection which justifies the large proportion of capital protected and deep protection barrier products in the market".

"The more risky products, those that are based on a worst of basket of stocks, do attract a fair amount of assets but not as much as those that are funds/index based which are safer," said Cohen.

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An element of fixed income exposure is beneficial in a well-diversified portfolio, BlackBee