Exclusive Partners (ExP), an independent French company which creates and selects investment solutions for both retail and institutional investors, has joined efforts with Morgan Stanley to launch the Multimanager Booster, a five-year life wrapped structured product offering 200% participation in the upside performance of an equally weighted basket comprising three managed funds (Carmignac Patrimoine, H2O Multibonds, DNCA Eurose).
Fund-linked products are a rarity in the French market which is dominated by equities these days. In 2015 just three out of a grand total of 414 structured products were linked to funds with the remaining products linked to equities (395); interest rates (seven); real estate (six); hybrids (two); and commodities (one).
Multimanager Booster is a private placement aimed at clients who have a positive view on the underlying funds, said Jas Haikou (pictured), financial engineer at ExP. "The equity markets have been highly volatile since the beginning of the year. Some investors rather trust big asset managers instead of having an exposure to equity indexes with static allocations," he said. "Fund-linked products allow the investor to benefit from the risk- and volatility management aptitude of assets managers as well as from their capacity to find good opportunities on the market."
Investors are still confident asset managers such as DNCA, H2O Asset Management and Carmignac Gestion are able to generate alphas despite the current market turmoil, according to Haikou. The underlying funds for the product, which is distributed via independent financial advisers (IFA's), were selected in two stages, said Haikou. "First, there are technical constraints: the assets under management must be superior to €100m and there must be at least three years of real track record," Haikou said. "Secondly, there is the selection of the basket with regards to asset allocation: historical performance and back testing on the Multimanager Booster strategy."
The funds were selected by the IFA's according to the convictions of the end-investors with the support of the analysis and simulations provided on the funds and the product, according to Haikou.
Although the Multimanager Booster is the second structured product linked to managed funds issued by ExP in recent months (Proximité Patrimoine 2015 which offers exposure to Carmignac Patrimoine, CPR Croissance Reactive, M&G Optimal Income and DNCA Invest Eurose was launched in September 2015), Haikou does not believe we will see a boom of fund-linked products in France anytime soon. "In terms of volumes, the French retail market basically remains a market for autocallables," he said. "Structured products linked to funds are mainly a diversification in the investment portfolio."
The retail market in France is a huge market for asset managers, according to Haikou. "This version of the product was initially designed for retail investors as they are used to invest directly in the funds through life-insurance contracts," he said. "However, ExP has launched many fund-linked products for institutional clients as well, with capital protection at maturity."
2015 was a very good year for ExP, on both retail and institutional activities, according to Haikou. "In structured products there was a 45% increase in revenue." For 2016 the firm plans to pursue the development of structured products, as well as expanding in other business lines such as securitisation and real estate, said Haikou. "This year, due to the turmoil on the market, [ExP] has to keep a high level of customer service to give investors the tools to react to market volatility and to understand the valorisation of existing products."
SRP's French database lists 10 structured products from ExP which were issued via Societe Generale (five), Morgan Stanley (three), Natixis (one) and BNP Paribas (one).
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