The Swiss Structured Products Association's Value Creation Report shows a 20% growth rate compared to 2017 and a total turnover of CHF331 billion (€290.5 billion) in 2018
Structured products issuers and manufacturers in Switzerland are targeting the country's pension fund segment as a potential outlet for structured investments, according to the Swiss Structured Products Association (SSPA).
“We intend to pursue the proper positioning of structured products as solution for pension funds and will continue our constructive discussion with the regulatory board of pension funds,” said SSPA president Georg von Wattenwyl. “An ongoing goal remains enhancing the knowledge and image of structured products, especially with self-directed investors and finally we plan to improve the positioning of structured products within the portfolio management of wealth management in close cooperation with our buy-side members.”
The Swiss trade body reported earlier this week that turnover for structured products traded by SSPA members increased by 20% and stood at CHF331 billion at the end of 2018 more than CHF56 billion above the previous year’s figure. The total quarterly turnover was also above the previous year's level and amounted in Q4 2018 to CHF81 billion.
In 2018, the association saw normal market conditions for three quarters with some market turmoil in the fourth quarter, according to von Wattenwyl. The market environment was reflected in an increasing number of investors trading structured products but also in a number of “barrier hits and redemptions in the last three months," he said.
Yield enhancement products remain the most popular investment category (46%), although their share was down on the previous year (57%). Leverage products constituted the second-largest product group with 22% of total turnover.
Equity (54%) and foreign exchange (27%) are still dominating the market’s turnover. Non-listed products constitute about 62% of turnover in 2018 (2017: about 70%). The three major currencies used to transact structured products in 2018 were USD, EUR and CHF, with a total share of 84%.
Despite nominally increasing by CHF8 billion to CHF183 billion, the primary market lost nine percentage points of turnover share (from 64% to 55%) compared to previous year, due to nominal turnover growth of 49% of the secondary market (CHF148 billion in 2018 relative to CHF100 billion in 2017). The secondary market comprised around 98% of all transactions in 2018, with the number of transactions growing by 83% compared to 2017.
“We are pleased that there is an increasing perception of structured products as innovative investment products which can generate returns for investors’ portfolios,” said von Wattenwyl, noting that investor demand remains quite solid and that the volatile market environment will probably be some demand for products for asset protection.
“They see structured products as an attractive element for generating returns in the portfolio context, even in very volatile market conditions," he said. "This is also due to the innovative product offering, with which one can quickly participate in new market developments and trends.”
For 2019, the association plans to continue “guiding and supporting” its members in relation to the changing regulatory environment, and will continue to expand its membership with new additions “as a platform for ongoing discussion of relevant industry topics”.
“An ongoing goal remains enhancing the knowledge and image of structured products, especially with self-directed investors," said von Wattenwyl. “We [also] plan to improve the positioning of structured products within the portfolio management of wealth management in close cooperation with our buy-side members.”
Click in the link to read the SSPA report.