Primonial Group has launched Derivative Solutions, a new firm dedicated to the development of structured investment solutions for French retail investors.
The new company, which was launched on January 5, 2017, comprises a four-strong team led by Brice Gimeno (pictured), president of Derivative Solutions, and, according to Gimeno, is seeking to capitalize in its financial expertise in the research and development of structured products and funds to meet the needs of private investors and companies.
"The expertise of our team allows us to create simple, transparent and innovative products, adapted to the different market needs and [investor] profiles," said Gimeno. "Our ambition is to collect nearly €200m in the first year."
According to Gimeno, the new firm will remain committed to its customers, "by transparently placing deals with them". "That means that, depending on the evolution of an underlying recorded on an anniversary date, we offer, for example, to pay a pre-determined coupon or to put it in memory," said Gimeno, adding that structures will be available via life insurance and securities wrappers.
Optistoxx April 2017, a defensive 10-year medium-term note (MTN) listed on the Luxembourg Stock Exchange, is the newest addition to Derivative Solutions' range of autocallable products linked to the Euro iStoxx Equal Weight Constant 50.
"We launched the "Optistoxx" range in January 2015 under the Primonial Derivatives brand," said Gimeno. "The range was created when we noticed the lack of major assertive trends in the market directions, which have been following a rather erratic pattern."
Optistoxx April 2017 [which is marketed until April 18, 2017 under the newly created Derivative Solutions structure] responds to this observation and with this product, investors receive a coupon even if the underlying falls slightly, according to Gimeno. The product pays a coupon of 8% and is redeemed early if the index did not fall from its initial level on the annual observation dates. In the case of a potential market downturn, however, the investor is still entitled to a coupon of 5.5% as long as the underlying has not fallen beyond 80% of its striking level. At maturity, the nominal invested is protected as long as the index has not closed below 60% of its initial level.
Life insurance wrapped capital-at-risk products with conditional protection are the most popular among French investors seeking higher returns in the current climate of declining average yield offered by funds denominated in euros.
However, the wrapper has been subjected to recent regulatory scrutiny, notably the article 49 of the Sapin 2 law - which extends the capacity of the French Financial Stability Board (HCSF) to restrict the free disposal of life insurance contracts for a period of renewable three months.
The insurance-linked wrapper made the headlines in the summer of 2016 after some firms such as Axa Thema halting the issuance of structured notes wrapped as life insurance products following a ruling by the Paris Court of Appeal on June 21, 2016 which ordered insurer Generali to compensate an investor on the grounds of the non-eligibility of 'complex' structured notes (EMTN) within the meaning of the French regulation (Insurance Code).
Despite the shrinking of the market, life insurance sales attributed to unit-linked contracts [including structured products] represented 24% of all new sales in November 2016 (compared to an average 19% share throughout the year), according to the latest figures of the French Insurance Federation (FFA).
Derivative Solutions will continue to distribute its products using the main insurance platforms of retail networks, said Gimeno, adding that the company is about to launch of a new product linked to the performance of a new underlying which will feature a safer payoff for investors.
"The goal is to diversify our solutions and protect our investors from market fluctuations," said Gimeno.
SRP's French database lists 103 structured products from Primonial dating back to July 2002. Last year Primonial launched 24 structured products including eighteen products linked to the Euro iStoxx EWC 50, two products linked to the iStoxx Europe Centenary Select 30, one product linked to the Eurostoxx 50 and two credit linked notes based on a basket of ten equally-weighted European stocks.
Between 2007 to 2016, the structured products business of Primonial was conducted under the Primonial Derivatives brand. During the period, the company issued more than 300 EMTNs and collected sales of nearly €1b.
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