Sales volumes increased in France. Elsewhere, the Korean regulator launched an investigation into banks and brokerage firms that sold ELS tied to HSCEI.

An estimated €38.1 billion (US$41.7 billion) was collected from 4,295 structured products in France – up 17% by sales volume compared to 2022 when around €32.5 billion was gathered from 4,836 products, according to SRP data.

Products offering full capital protection captured 45% of the total sales volumes in 2023 – up 30 percentage points by market share compared to 2022 and a 229% increase by sales volumes year-on-year (YoY).

The increase in market share of capital protection products was driven by strong sales of interest-linked callable structures such as CA Oblig Rappelable (Mars 2023) and Obligation LCL Select AV (Janvier 2023) – both issued on the paper of Amundi – which sold €1.7 billion and €1.4 billion, respectively.

CA Oblig Euro (Janvier 2023), another capital protection product from Amundi, was the highest selling equity-linked structure of 2023 (€277m).

Conditionally protected products with a knock-in barrier or put-down-and-in was still the largest category with 55% market share (2022: 78%), despite collecting 24% less in sales volume.

Hopping over to the US, Blackrock has seen the assets of indexed annuities linked to its investment strategies exceed US$10 billion over the last 12 months. The volume has mainly been driven by fixed index annuities (FIAs) with the remainder coming mostly from registered index-linked annuities (Rilas).

“It’s been an incredible time for indexed annuities,” Igor Zamkovsky, head of indexed annuities, retirement insurance at BlackRock. “Retirees need guaranteed income very much in view of last year’s geopolitical uncertainty and market volatility.”

Within the retirement insurance segment, the US asset manager forges ahead in the annuity space across variable and indexed products. For the latter, benchmarks for crediting strategies cater to FIAs, Rilas as well as index universal life (IUL) through both custom index solutions and BlackRock’s flagship iShares exchange-traded funds (ETFs).

For the first nine months of 2023, the combined sales of FIAs and Rilas reached US$105 billion following another quarter of high activity for Rilas.

In South Korea, the Financial Supervisory Service (FSS) started an investigation on 8 January which includes on-site inspections at a total of 12 banks and brokerage firms that sold ELS tied to the Hang Seng China Enterprises Index (HSCEI).

The scope of the FSS probe includes sales limit management and whether related laws, such as the Capital Markets Act, have been breached in the H-index-linked ELS sales process

Based on a probe of major sellers conducted last November and December, the Korean regulator revealed in a report released on Sunday (7 Jan.) that it had encountered management system issues among some ELS sellers including insufficient management of ELS sales limits, policies to drive sales of high-risk and high-difficulty ELS products according to KPI and failure to store contract documents.

Following the sluggish performance of the HSCEI over the past year, concerns over potential retail investors’ losses loomed over the Korean market as the total outstanding balance of ELS products linked to the HSCEI amounted to KRW19.3 trillion (US$14.66 billion) as of last November, according to the FSS’ data.

Over the past few years, following the appointment of Axel Lomholt in 2021 as head of index business, ISS, STOXX has increased its focus on building its ETF business for the buy-side. This was a natural move as Lomholt has an ETF background having joined the index provider from Vanguard.

“[But] we have not turned our back on structured products which remain a core driver of our long- term growth strategy,” he told SRP. 

According to Lomholt, in 2023 some of the broader themes played out across the board with sustainability driving significant activity in the structured products market.  

“There has been an evolution in indexing and in the indices we provide to the market not only from a thematic perspective but also from a structuring standpoint with overlays like decrements having ascended in significance, enhancing their impact and prominence within the market,” he said.

“This evolution reflects a dynamic shift in both the composition and emphasis of indices, indicative of a broader paradigm shift in the investment landscape.” 

This shift involves three major themes blending together - the need for customisation, sustainability and diversification.