For the first time in many years, the outstanding volume in structured products the net inflow is showing an increase. While the net inflow for the year is strong, at €6.4bn, October was characterised by a vastly superior volume of maturing products when compared to the amount sold, which accounted for only around 20% of what was returned to the market.
At the same time, investors are developing a taste for thematic indices as underlyings. "With reference to the underlying, the so-called thematic indexes are more and more popular," said Alberto Amiotti (pictured), a member of the institutional sales team at Banca Aletti. "These indexes are related to global megatrends (such as emerging markets, population dynamics, climate change and scarcity of resources)."
Italy remains one of the few European markets seeing an increase in investors, led by opportunities for income and capital protection. "The Italian structured products market is moving towards products capable of paying periodic coupons, in order to obtain higher returns than bonds," said Amiotti. "The protection of invested capital at maturity is also a strong plus."
Six hundred and twenty-seven structured products with estimated sales of €15.52bn have been added to the SRP Italy database this year, a large increase in sales from the same period last year, when 760 products worth €13,001m were added.
The most active provider in October was BNP Paribas, followed by Banco Popolare, which had a successful month, mainly due to the striking performance of Banca Aletti, which was able to gather an estimated volume of €185m from three products. "Aletti structures simple and easy to understand products, but is also able to meet the specific needs of the clients, offering tailor-made products," said Amiotti.
Income products are gaining market share, with sales volumes rising by 134%. "Investors favour digital options, for their attractive yields when compared to bonds, although with varying degrees of protection," said Amiotti.
Similarly, there has been an increase in digital payoffs in the form of knockouts and reverse convertibles, as the yield hunt continues. One of the products recently sold with this feature was the Target Cedola su Eurostoxx SD 30, which offered an annual coupon of 3% if the Eurostoxx Select Dividend 30 is at or above 100% at the annual observation date. "Investing in high dividend yield shares means investing in solid companies, capable of generating stable cashflows," said Amiotti. "An investment in high dividend stocks may also be perceived as a defensive strategy in periods of high volatility, attracting more and more volume from investors."
This year, there have been 33 products issued that offer capital returns equal to 100% of the initial investment, a market share of 34%, far above the 7.5% recorded over the same period last year. The increase is even more impressive if all knockout products and reverse convertibles with a low barrier are taken into account. "Investor demand for capital protection, either unconditional or conditional, is strong," said Amiotti.
Most new products are linked to equities, with the Eurostoxx 50 the most popular underlying this year, with three products issued in October raising €112m from local investors.
The October 2016 Market Review for Italy is available at the following link.
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