This week we look back at SRP Europe 2023 with some of our panel coverage and the latest news.

Over 350 delegates from 29 countries and 49 sponsors came to London to hear a variety of views on the evolution of the regional market as SRP celebrated its 20th Anniversary.

Twenty years of structured products haven’t all been plain sailing - turbulent markets, financial crisis, Brexit, and pandemic to mention but a few.

Europe saw a slight increase of four percent in retail structured products volume to €500 billion last year, according to data from SRP. The data was presented by Nikolay Nikolov, product manager, Derivatives Data Services, SRP Delinian.

Capital protected products are back and they will be a big part of the market in 2023

On day one of the SRP Europe 2023 Conference, the 20 years of structured products panel, moderated by SRP founder Robert Benson, discussed how the structured products market has evolved during the past two decades.

Capital protected products are back and they will be a big part of the market in 2023. With interest rates going up adapting products to the new market paradigm is the game for issuers and distributors. Structured products will have a new competitor in fixed income bond products on the back of increasing bond yields.

Panellists argued that investors risk aversion might be a challenge and there could be a shift away from autocallable products as they could be perceived as less relevant in the current market environment.

This could be exacerbated by a switch from yield enhancement products to products linked to credit or interest rates, but the shift in demand from autocallables to capital protected products has been a trend in Europe’s markets throughout 2020.

The panel debating structuring and risk management amid volatility concluded that although autocalls remain the best-selling payoff type across Europe, in some markets there has been a “noticeable demand shift from autocall to capital-protected products.

Despite decreased sales, however, autocalls continue to account for a significant part of live products exposing many trading desks to dynamic risks.

In the global trends and investment opportunities panel discussed the shift in their structured product offering in a rising interest rates and high inflation environment from equity-centric to rates, followed by credit and equity.

The conclusion of this panel was that investors generally focus on the downside market risk of losing money at a time when the consensus is that the current environment features a long-term period of potentially persistently lower returns. Structured products are well positioned to deliver on this need.

“Income, rate focused products, participation, and digital products, giving people headline rate, inflation linked products to deliver solid returns, while autocalls will remain perennially popular,” said one panellist.

“That's where the market’s going.”

Market news

The weeks started with news of a 25% increase in year on year sales of indexed annuities in the US market. In the fourth quarter, FIA sales were US$22.3 billion, a 34% increase from the prior record set in the fourth quarter 2021. For the year, FIA sales were US$79.8 billion, up 25% from 2021, and 9% higher than the record set in 2019.  

Registered index-linked annuity (Rila) sales were US$10.1 billion in the fourth quarter, down 2% from the fourth quarter 2021. Despite lower fourth-quarter results, total Rila sales reached US$41.1 billion in 2022, six percent higher than prior year and a new all-time high for the product line’s sales. 

In Europe, Marex announced the launch of Key Information Documents (KIDs) across EU27 in twenty languages under the private placement memorandum through Marex Solutions and its specialist team Marex Financial Products.

Although the issuer already provides KIDs on its Italian products listed on Borsa Italiana as a retail offering requirement, this has now been extended to standardised payoffs across Europe.

Amundi said it had adapted its structured product offering to match market environment over the last quarter.

The asset manager reported an uneven year for its structured products with outflows in the first half due to market conditions substantially offset in the second half by strong momentum in the French and international networks.

In the UK, the association of wealth managers released a six-point plan to reform disclosure requirements in the wake of Priips reforms in the UK including the reduction of the weight placed on disclosure as a regulatory tool, recognising both low levels of consumer engagement and low levels of financial literacy in the adult population, as well as the range of assets subject to any post-Priips product regime, by excluding assets such as retail bonds and convertibles, and focussing on mass market products such as funds. 

On the arrivals & departures terminal, Société Générale (SG) announced the appointment of Alexandre Fleury as co-head of global banking and investor solutions, alongside Anne-Christine Champion, who joined from Natixis; and Thorsten Heidt re-emerged at Leonteq as managing director at the Swiss provider’s Frankfurt office.

Heidt rejoins the structured products industry after a 12-month career break following his departure from Société Générale in December 2021. Heidt transferred to the French bank in 2019 as a managing director following the acquisition of the German Bank’s EMC division.

Image: Utah 51/Adobe Stock.