Let’s focus our attention first on regulation this week, something that is always at the back of market participants’ minds.
In the UK, HM Treasury has announced a five-year extension of the current exemption for Undertakings for the Collective Investment in Transferable Securities (Ucits) funds in relation to the requirements of the Priips Regulation, notably when it comes to the production of a Key Investor Information Document (KIID). The extension is part of the government’s regulatory divergence with the European Union and includes a review of the UK retail disclosure regime, which will be followed by changes to the Priips Regulation or a successor regulation sooner than 2026.
The South Korean regulator has been very proactive in recent years, following a high-profile product mis-selling incident in August 2019. The latest measures from the Financial Services Commission will see financial institutions required to record their sales process when so-called highly complex investment products are sold to elderly investors - the recording and deliberation system will be put into use on 10 August. These products include derivatives products, derivative linked securities and derivative-linked funds (trust, discretionary) that can lead to principal loss higher than 20%.
Income products on credit default were more appealing than equities given the limited visibility - Jean-Pierre Ané
Six Swiss exchange has gone live on Hong Kong SAR-based multi-issuer structured product platform Contineo more than three years after joining the bank consortium behind the fintech firm as a strategic partner. Its reference data distribution platform, Connexor, went live on Contineo on 25 May with the aim of substantially simplifying trading flow. The launch comes more than three years after the Swiss exchange acquired a 13% stake of Contineo back in December 2017.
Swiss private banking group Julius Baer enjoyed a strong start of the year driven by an increase in client assets while its structured products issuance reached their highest levels since Q2 2019. It saw a significant rise in profitability in the first four months of 2021: AuM rose to CHF470 billion (US$525 billion) at the end of April 2021, a year-to-date increase of eight percent. The increase was driven by continued net new money inflows, positive stock market performance, and the softening of the Swiss franc ‒ particularly against the US dollar, euro, and British pound.
Another positive highlight in the past week came French bank BNP Paribas, whose main vehicle for structured products’ outstanding approaches €70 billion, of which €14.1 billion is due to mature in 2021. BNP Paribas Issuance B.V. has reported the total fair value of issued securities amounted to €69.6 billion on 31 December 2020 (end-2019: €64.9 billion). Of this total, €43.3 billion can be attributed to certificates; €20.2 billion to medium-term notes and €6.2 billion to warrants.
In an interview with SRP, Jean-Pierre Ané, head of financial engineering at Kepler Cheuvreux Solutions, noted that the Covid-19-related uncertainty meant that for the organisation, credit and fixed income became cornerstones as they presented great opportunities.
“Income products on credit default were more appealing than equities given the limited visibility. Looking at treasuries and cash flows in combination with state support, it seemed an obvious proposition and some entities offered very good opportunities for investors (spread v default). However, market timing was short, and we witnessed equity inflows right after credit inflows,” he said. “As shockwaves were felt across asset classes, the similarities with the collapse of Lehman Brothers in 2008 became apparent.”
In the product sphere, Sirius Asset Management collaborated with Société Générale for the launch of S*AM Greener America NR 2116 in Sweden. The product offers 100% participation in the upside performance of the proprietary SGI Greener America Ahead NR USD Index. The index is calculated and maintained by Solactive. It comprises 48 stocks of companies which might benefit from President Biden’s plan for a ‘clean energy revolution and environmental justice’. The note is targeted at private banking clients and issued at 46% (SEK4,600).
Finally, in people moves news, Citi has promoted Jean Paul Corda as head of Emea retail third party sales with immediate effect, according to memo seen by SRP. Corda will take on the added responsibility alongside his current capacity as head of institutional equity derivative sales and head of third-party sales for France, Belgium and Luxembourg.
CAT Financial recently has launched a new subsidiary in Dubai to offer structured products and brokerage services to institutional and professional clients. David Schmid, former head of investment solutions and member of the executive committee at Leonteq, has joined CAT Financial Group as a strategic partner and co-owner.
Effective 1 June, Schmid will join the Swiss firm to drive the expansion of CAT Financial in Switzerland with a particular focus on growing outside its core market.