The issuer of structured products has carved out its own space in the Italian listed market within the first year since launching its public offering certificates programme targeted at the country’s financial advisors, private banks, family offices, and wealth managers.

Since Marex Financial Products entered the Italian public retail structured products market in March 2022, it has listed over 200 products with a turnover of more than €200m and reached the top 10 in the Cert-x segment of Borsa Italiana. 

The non-banking issuer was also recognised with silver and bronze accolades for its products in the Italian Certificate Awards 2022 in February 2023, leaving its mark in categories dominated traditionally by established players in the Italian market.

“To be positioned next to well-known issuers in the country after nine months on the market is a testimony to our hard work. This is a very promising start for us, and we are aiming for the top five in the next few years,” said Antonio Manfre (pictured), business development manager at Marex Financial Products.

Marex’s Italian team has capitalised on the firm’s digital and technological capabilities and speed to market to break into one of the most competitive markets in Europe. However, price competitiveness and client management have played an equally important role.

“Serving the needs of clients and reacting quickly to market movements has been key to our success,” said Manfre. “We can issue structured products and make these available for investors in the market in only two business days.”

Marex’s offering in Italy, however, is not only focused on reactiveness to market movements and opportunistic trades, but also on providing a range of products that can meet different risk profiles, including the very conservative as well as the more speculative in terms of risk-reward, according to Manfre.

Market environment

With rising interest rates, there is always a concern for higher competition from the fixed income market, yet structured products have become part of the Italian investment ecosystem in their own right as the financial awareness and understanding of retail investors has increased.

“In the past when yields were very low, investors tended to use these instruments as a bond replacement, even though the underlying risk of most structured products is mainly equity risk,” said Manfre.

“This was a distortion of the zero/ negative interest rates environment. Investors have realised that structured products can also be used as an equity substitution and a way to sell volatility.”

Although positive interest rates make fixed income bonds more attractive, investors are considering structured products alongside either stocks or ETFs. Manfre believes yield enhancement products, capital protection and conditional coupons will be “big drivers of demand for structured products in 2023”.

“With rising rates and higher volatility, you can offer better terms and capital protection making these products even more attractive to investors,” said Manfre.

Investor awareness

The Italian structured products market has evolved overtime from fixed coupon callable bonds (with no derivative involved) to a vibrant growing certificates market that offers opportunities to new players.

“[It] is a much more mature and sophisticated market than what it was some years ago,” said Carlo Ceriani (right), investment solutions manager, Marex Financial Products. “It's much more competitive and product manufacturers face more proactive clients with market and product knowledge.”

Ceriani notes that investor education has increased significantly.

“Product distributors understand that another big advantage that structured products have compared to bonds is that you can easily negotiate them with market makers present throughout most of the day,” he said. “Whereas with bonds, even if they are listed, it's a little more difficult. The market for structured products has therefore grown.”

Market exposures, trends

According to Ceriani, investor preference for market exposures is “quite wide” in the Italian market.

“The main distributors are focused on market cap and decrement indices, but there is also appetite for baskets of equities, in particular Italian equities and indices. Italian investors want to buy what they know and invest in names they recognise. They also lean towards the big names.”

After a challenging year for many autocallable products which did not trigger their early redemption as a result of poor market performance and was mainly visible in the lack of rollover money - “the market uncertainty dried the market out with decreasing volumes” - 2023 has started with risk appetite returning as the market bounced back with strong levels.

“Investors are still looking for structured products because they have the perception that the market has not much to offer in terms of upside, while there will be consistent downside in the near term,” said Ceriani. “The market is full of potential with eventual volatility creating an ideal environment for the creation of structured products and having a wide range of offering.”

Despite the recent turmoil in the banking sector which has brought new uncertainty and counterparty risk focus, Ceriani remains positive as Marex’ strategy was also to gain market share at the expense of the traditional issuers of structured products – investment banks.

“The recent events do not change things for us,” said Ceriani. “Marex entered a market dominated by investment banks to offer investor diversification. We are fully investment grade rated by Standard and Poor Global (BBB, June 2022) and we think there is space for both types of issuers.

“The recent events of the last few weeks show some clear weaknesses in the banking system, but at the same time, we saw the resilience of the sector and the support it has received. We prefer a market full of competition and opportunity.”