Banque de Luxembourg is marketing Sélection F Alpha Protect in Luxembourg, a new five-year capital-protected note offering 80% participation in the positive performance of Sélection F Alpha, a fund managed in Luxembourg by Banque de Luxembourg Investments.
"Our clients are looking for capital guarantees and with the current low interest rates you have to look for underlyings that are not so expensive," head of fixed income and structured products at Banque de Luxembourg, Pierre Stoll (pictured), told SRP.
According to Stoll, pricing conditions for funds are fair and are less volatile than a basket of indices featuring the Eurostoxx50 or Nikkei225, for example. "Clients are aware that equities are expensive, even though they are still the best asset class in which to invest," he added.
Sélection F Alpha Protect is not the first fund-linked structure issued by Banque de Luxembourg this year. Between May and July, the bank launched three capital guaranteed notes, each linked to a basket of three equally weighted funds (BL Flexible, BL Dividends and BL Emerging), with a combined sales volume of €24.5m.
"You have to ask yourself the question: What are you selling to your clients?" said Stoll, who emphasises the importance of banks showing know-how in asset management. "If the clients are happy with this, then they will buy into this."
Funds have become increasingly popular as an underlying asset class this year, not only in Luxembourg. In neighbouring Belgium, for example, the number of fund-linked structured products with strike dates in 2013 to-date is 31 - with sales of €410m - compared to only eight fund-linked structures (worth €73m) during the whole of 2012.
SRP's Luxembourg database includes a total of 19 products from Banque de Luxembourg, including 12 securities and seven deposits.