The focus has very much been on index innovation in the past week or so, with HSBC, UBS and Deutsche Bank all making headlines.

HSBC has closed a structured deposit tracking the MSCI World ESG Screened Risk Control 5% Index (USD), marking its first use of MSCI indices for structured deposits in China. The two-year product, which deploys a shark fin structure based on the underlying’s average quarterly performance, guarantees a minimum annualised return of 0.5% with an uncapped maximum based on a participation rate of 120%.

Investors are worried about the 60/40 portfolio approach and the pandemic not going away - Spyros Mesomeris, UBS

UBS’ global head of quantitative investment solutions (QIS) structuring Spyros Mesomeris has told SRP that there is a more positive outlook for QIS than perhaps two to three years ago. This is because the market is seeing low bond yields and equity markets have rallied, so investors are looking for cross asset diversification, and defensive solutions to protect against potential equity market pull backs.

“Investors are worried about the 60/40 portfolio approach and the pandemic not going away. We've seen recently one-year correlations between equities and bonds turning positive, so people have been starting to question the 60/40 paradigm, which had worked well over the previous 20 years,” he said.

Deutsche Bank’s Caio Natividade, global head of QIS research, believes that when there is macroeconomic uncertainty, and it is difficult for investors to take a view on market direction, strategies with a defensive tilt can deliver returns.

“In the equity space, we have developed quality investing strategies that invest in companies that have greater competitiveness and also greater competency of management,” he noted.

On the data side of things, Société Générale retained its position as the number one manufacturer of structured securities in Germany in July, according to the latest figures released by the German Derivatives Association (Deutscher Derivate Verband, or DDV). The French bank achieved a turnover of €588.8m during the month, which translates in a 12.70% share of the German market. DZ Bank and Morgan Stanley came second and third, with a market share of 11.32% and 10.19%, respectively, while Vontobel (9.73%) and Citigroup (9.16%) completed the top five.

Germany has also allowed some institutional funds (Spezialfonds) to hold as much as 20% of their assets in cryptocurrencies could spur innovation and uptake in this space. The regulatory move could mean pension funds and insurance companies in Germany are more likely to accept Bitcoin and other cryptocurrency assets into the assets they manage.

On the flip side, the European Commission has set out to regulate cryptocurrency transfers more tightly, by extending existing anti-money laundering (AML) and countering terrorism financing (CTF) laws to the space. It also intends to implement a ban on all cryptocurrency service providers from offering anonymous cryptocurrency wallets. At present, only some of them are subject to AML/CTF rules.

Hiring-wise, Idad has bolstered its UK team with the hire of Tom Ward as its UK head of strategic partnerships. In this role, Ward will be working alongside Thom Gascoigne, head of UK distribution in the London office. Ward joins from Investec Wealth, where he was sales & relationship manager for nationals, networks & platforms.

Catherine Chen, former executive director in institutional equity derivatives sales for Taiwan at Morgan Stanley, left the bank on 29 July, according to an internal memo viewed by SRP. Chen joined the US bank in 2014 from J.P. Morgan where she stayed for two years as a vice president. Her departure comes after Bilal Ali joined Morgan Stanley from UBS as head of Asia cross-asset structured sales on 12 July.

Finally, Austria’s Raiffeisen Centrobank is targeting high dividend-yielding companies via a partially protected certificate, the eight-year Dividend Stocks Bond 90% XVII. The certificate offers a coupon of 24% if the Stoxx Global Select Dividend 100 Index closes at or above 108% of its starting level at the end of the investment term. The minimum capital return of the certificate is set at 90%. However, due to its step-up redemption feature, the investor is guaranteed a return of 100% of the nominal invested, even if the index has fallen by up to 10%. In case the final index level is between 100% and 108%, the certificate redeems at 108% and if the index closes at or above 108%, redemption takes place at 124%. Investors do not participate in price increases of the index beyond the cap of 124%.

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