Citi has won the Best House, APAC and the Best House, Equity accolades at the SRP Apac Awards 2021, which were announced on 16 June.

The US bank has increased by 3.1x its gross issuance of structured products on equity and hybrid assets for financial intermediaries in Apac in 2020 with an increased focus on actively managed certificates (AMCs) and quantitative investment strategy (QIS) indices.

In 2020, Citi launched its first ESG-linked AMC in Asia tracking the a sustainable global equity index advised by a European private bank. Two transactions of the delta one certificates were completed by the advisory and discretionary portfolio manager (DMP) desks of the private bank.   

Small notional or denomination facilitate efficient portfolio allocation decision - Jennifer Wong

Administered by Citi and managed by the DMP desk, the underlying index offers exposure to global equity baskets with ‘sustainability’ screening set up by the private bank's in-house ESG toolbox. Its strategy features a 50x rebalancing pa, same day trading in Asia hours as well as flexible dividend handling and cash pocket, according to Médéric Gehl (below right), head of delta one and retail solutions Apac at Citi.

The index is managed on Citi’s upgraded Atlas covering reporting, overview, performance analysis and rebalancing order submission.


“The trend for the use of custom baskets has accelerated over the past few years and such bespoke portfolios are becoming more popular with clients - not only in distribution, private banking (advisory and DPM) but independent wealth managers (family offices [FOs] and external asset managers [EAMs]),” Ghel told SRP.

Transparency and easy access largely account for the popularity of AMCs as the underlying baskets are published in Bloomberg as an index with a third-party agent handling corporate actions and dividends policy, and are accessible via instruments ranging from OTC swap to securitised format, according to Ghel. 

“It’s nothing else than a delta one certificate offering pass-through access to an index being dynamically managed,” he said. “With [the] ongoing buzz around managed strategies, we’re witnessing several interesting trends in the development of the AMC market in Apac.”

The client base for AMCs has expanded regardless of varying investment objectives. Institutional clients including FOs have been moving traditional funded mandate into AMCs, although their preference for unfunded swap and funded securitized format are playing a role, said Ghel.

Meanwhile, asset managers, which include private banks’ DMP and EAMs, are increasingly using AMCs as they’re able to access an entire thematic through one instrument while keeping flexibility of dynamic management, according to Jennifer Wong (below right), head of private banking sales Apac at Citi.

“Small notional or denomination facilitate efficient portfolio allocation decision,” she told SRP. 

As the advisory desks of private banks are driven by the need for more running revenues as opposed to upfront revenues, the custom basket in delta one form can help generate recurring management fees, according to Ghel.

“It can also be a way to offer access to DPM execution capabilities in small notional of US$10,000,” he added. 

According to Wong, there is a widened scope beyond AMCs as static basket certificates (SBCs) come to the fore.

“With thematic or custom baskets gaining popularity, deploying SBCs will allow investors to get a flavour or have a simpler product as a start,” she said. “It's a perfect starting point to warm up investors by private banks/distributors which are new to this offering.”

Meanwhile, the transition from traditional delta one or pass-through exposure to option payoff is also under way fitting into a spectrum of investment rationale. In terms of underlying assets, the building blocks are shifting towards cross asset, unfunded products and FX hedging, said Ghel. 

ESG and beyond

Earlier this year, the US bank rolled out the Citi Multi Asset Active Allocation VT 4.5 Index (MA3 index) in partnership with BlackRock in a response to the demand for active management to navigate through market uncertainties.

“In the thematic indices space, we’ve launched products linked to the outperformance of MSCI EM Asia ESG Leaders Index vs. MSCI EM Asia Index, as ESG strategies have started to show alpha against traditional benchmarks brought about by the acceleration towards quality stocks and green stocks in the new economy,” said Benny Chia (right) at Citi’s multi asset structuring and solutions.

The bank expects the ESG momentum and the new economy transformation to continue in 2021, with post Covid-19 thematic indices starting to play a role.

“Decrement indices would also be something to look out for as structured product investors are becoming increasingly sophisticated,” said Chia.

On the listed structured product side, Citi in March 2020 relaunched its Citi First equity warrants (DWs) on Hong Kong Stock Exchange five years after its exit from the space. Its warrant turnover reached US$4.7 billion (HK$36.5 billion) in 2020 and US$2.4 billion in the first quarter of 2021, according to Guillaume Besson, director of listed structured products at Citigroup Global Markets Asia. The bank is also planning to add callable bull/bear contracts (CBBCs) in the coming months.


Back in 2018, market neutral products in Asia started gaining traction via dispersion strategies in note format. The subsequent low rates environment makes warrant an attractive proposition as investors pay a premium of around 2% pa for the view that the basket performance of stocks - typically a total of 10 - disperse against individual performance, according to Wong.

“With key event risks in 2020, such as the US election, Brexit negotiation amid the Covid-19 pandemic, rotation or outperformance on markets and sectors had been widely discussed on the street […] and investors had been profit-taking to get double or triple return upon holding period of less than a year,” said Wong, citing popular themes like ‘new vs old economy,’ ‘CO2 reduction vs emission,’ ‘red wave vs blue wave’ and ‘consumer vs tech’.

Another variant of market neutral strategies is the outperformance payoff with a shorter tenor between one to two years where investors were more comfortable to have it in fully-funded format.  

“Mostly transacted outperformance notes will have a floor of 60% to 70% and outperformance warrants are offered at less than 5%,” said Wong.

Going forward is all about sustainability of the structured product business, according to Cyrille Troublaiewitch (pictured), co-head of equity derivatives distribution and multi-asset group Apac at Citi. 

“Fundamentals are extremely strong, with Asia’s HNWI population expected to increase strongly, developments in the Greater Bay Area as well as Singapore Asean Hub,” Troublaiewitch told SRP. 

“The obvious concern is a softer equity market – we see investors being keener on dispersion products, warrants or hybrids,” he said. Our ambition is to work with our partners to continue to streamline their flow activity through e-platforms and diversify their business mix with alternative solutions.”