Maybank has won the Best Performance, Singapore award at the SRP Apac Awards 2021, which was announced on 16 June.
The Malaysian bank has seen its asset under management (AuM) of structured products, which are offered to ‘premier and private clients’ in Singapore, almost doubling as of 30 June 2021 compared with 2019-end.
Its trading volume of structured products increased 100% in Singapore in 2020 from 2019, marking the “best year on Maybank’s record” since 2018.
We were one of the first to trade structured notes which allowed for physical delivery of mutual funds - Alvin Lee
Despite the rise, Alvin Lee (pictured), head of group wealth management and community financial services for Singapore at Maybank noted that “of all the adjectives to describe 2020, ‘normal’ is probably the last word that comes to mind”.
“Looking ahead, we are optimistic that global growth will rebound in 2021 as economic activities gradually normalise,” he told SRP.
According to Lee, Maybank adopted market neutral strategies in 2020, including minimum redemption outperformance notes and ‘one star’ fixed coupon notes with protective features, in a response to investors’ continuing demand for fixed coupon.
The outperformance payoff “allows clients to express specific themes while still enjoying gains in a bear market as long as outperformance occurs between the two underlyings”, said Lee, citing global technology equities v US equities as one of the themes deployed.
On the other hand, the ‘one star’ notes were aimed at investors seeking protection from taking delivery of shares at maturity when the product is at a loss by retaining the principal as long as one underlying in the equity basket performs above a set barrier.
In 2020, the bank offered equity underlyings from several markets including Hong Kong, US, Singapore, UK, Japan, Switzerland, France, Germany and Australia as well as actively managed and passive funds such as the United States Oil ETF, Fidelity Funds Global Multi Asset Income Fund and Pimco Funds Global Investors Series Income Fund.
“In Q2 2020, we were one of the first to trade structured notes which allowed for physical delivery of mutual funds,” said Lee. “This gave our clients the dual benefit of the opportunity to purchase the mutual funds at a discount to current market prices and the potential to participate in any upside performance.”
Structured warrants were also opened up in Q1 21 to private clients with at least US$1m investable assets at Maybank.
“Structured warrants compounded the benefits of payoffs like the outperformance note as it allows clients to participate in tactical solutions with a small capital outlay,” said Lee, adding that they also allow clients to express targeted multi-directional views while mitigating underperformance risk at the cost of the premier.
Lee also attributed the structured product growth to Maybank's proprietary tools, which “enable the product team to effectively monitor portfolios and clients to better understand tactical structured product solutions”.
“Good product solutions are only one part of the equation, other factors like client adoption and client engagement are contributing factors to success,” he said.
“The client engagement tools synthesize elements of how the structure will perform under various scenarios, which are more visually compelling compared with standard term sheet.”
The largest Malaysian bank is working to widen the suite of ESG-themed wealth solutions and increase its AuM in sustainable investing as part of its strategic plan, according to Lee.
As a first step, the research team has completed referencing MSCI ESG index and incorporated ESG ratings for all securities under coverage as of June-end. Front office staff are encouraged to wrap underlyings with high ESG ratings into structured notes.
“For a structured note to be considered an ESG security, the referenced underlyings must have a minimum MSCI ESG rating of BB and above,” said Lee, adding that currently 70% of structured notes traded by Maybank in Singapore met the criteria.
“As a next step, the business is keen on exploring ‘green notes’ where the proceeds from investors are invested in businesses that meets Maybank’s ESG framework,” he said.
Maybank launched one tranche of structured deposit in March 2020 just before the global outbreak of Covid-19.
“Throughout 2020, interest rates remained low, resulting in a challenging environment for future structured deposits launches,” said Lee. “To address clients’ demand for principal-guaranteed solutions, [we] launched the equity-linked note 100% minimum redemption, [which] allows clients to reference a basket of shares covered by Maybank’s research.”
In March 2021, the bank issued this year’s first deposit tranche that seeks to capitalise on intermittent interest rate spikes and will pay out a 4.4% cumulative return to investors after five years. It has also marketed a second tranche, which is open for subscription till 20 August.
“Due to the pent-up demand for principal guaranteed products, [we] achieved 300% of the year’s structured deposit budget with the first single tranche,” said Lee.