The number of structured products denominated in US dollars is on the decline in Belgium. Whereas last year 84 products out of a grand total of 294 public offers were issued in the US currency, this year, even though total issuance has increased (309 products to date), only 67 products were denominated in dollars, including seven that were launched during October. There were 13 products linked to the Norwegian krone this year, while one product, Deutsche Bank's Fund Opportunity Coupon 2022, was linked to the Swedish krona.
One of the Belgian providers to have cut down on dollar products is BNP Paribas Fortis. "Any structured products we launch must fit within our investment strategy," said Jurgen Vanhaverbeke, head of product management, save & invest, BNP Paribas Fortis. "We must believe in the product; the underlying theme should be something we are positive about and that includes the currency. It is true that last year we were more positive about the US dollar than today."
"We still offers products in Norwegian krone and in Australian dollar, not via structured products but via plain vanilla bonds instead," said Vanhaverbeke.
The bank's capital protected Sustainable Development Note 2026, which participates 75% in the rise of the Solactive Sustainable Goals Europe MV, a new index launched by BNP Paribas in collaboration with Solactive and Vigeo Eiris, was one of the highlights of October, which saw 25 structured products added to the SRP Belgium database.
SRI is a very important theme, not just for BNPP Fortis but also for its clients, according to Vanhaverbeke. "In the past, we have launched a number of products on SRI indices [Ethical Europe Equity and Ethical Europe Climate Care], but it's important, from time to time, to change the themes we use."
Fourteen of the products open for subscription in October protected 100% of the nominal invested; nine protected 90% of capital; Belfius Healthcare Notes 5 protected 95% while two products put capital at risk.
One of the 90% protected products was Axa Bank Europe's Optinote World Demography. The six-year structured note offers 100% participation in the performance of the iStoxx Global Demography Select 50 EUR (price), subject to an overall maximum capital return of 150%. It is the second product distributed by the bank linked to the demography theme this year; in March, Axa launched Optinote Demography for which the iStoxx Europe Demography 50 EUR (price) was used as the underlying index.
"[Optinote Demography] was a success and that's one reason why we decided to launch a product with a similar type of thematic index," said Caroline Boulenger, head of product management daily banking, savings & investmentsat Axa Bank Europe in Antwerp.
The majority of Axa Bank's sales is in 100% capital guaranteed products, but the bank certainly has clients who are willing to give up full capital protection in return for a more attractive payoff, according to Boulenger. "Even though a 90% capital guaranteed product implies potential capital loss, it allows us to offer a more attractive product for the clients. It allows us to diversify our offer, so that our clients do not always have to buy the same type of product."
Boosted by their shorter terms, 90% capital protected products have become increasingly popular among the notoriously cautious Belgian investors: 115 products protecting 90% of the nominal (average term 4.7-years) achieved sales of €2.2bn this year to date, against 163 fully protected products (average term 8.3-years) worth €2.3bn.
Assets under management (AUM) for capital protected funds in Belgium decreased by €500m, or 4.9%, representing a capital of €9.3bn at the end of June 2016, with €7.81bn of outstanding assets linked to equities and €1.49bn to interest rates, loans and currencies, according to the Belgian Asset Managers Association (Beama). The decrease can be attributed to a combination of net outflows and negative investment returns of the underlying assets, said Hugo Lasat, chairman of Beama.
In the first quarter of 2016, the association saw both new subscriptions and redemptions in the capital protected funds, however, between April and June, there were almost solely redemptions in this fund category, according to Lasat. "If we assume that this rate of net outflows [from capital protected funds] would continue during the remainder of the year, we would end up with an amount of around €700m of net redemptions by the end of 2016," said Lasat. The average net outflow of the past five years amounted to €2.1bn annually."
Decline in capital protected funds continues, balanced funds remain largest asset class, Beama
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