On the second day of the SRP Europe 2024 Conference, a senior structurer and a portfolio manager exchanged their views on popular strategies and investor behaviour.

Mark Sukhenko, head of multi-asset structuring for Emea at Citi Global Wealth, is a believer in the value of powered relationships. “You really have to be aware of how and the way to build trust and then play it into those relationships,” he said.

The experience was learnt the hard way when his team aligned themselves with the wealth manager’s chief investment officer (CIO) view early last year, which had a call on China and turned out to be a misjudgement.

The call was later corrected, but there was already discretionary allocation based on the bullish view. The time lag to amend the CIO view required wealth managers to treat customer relationships with care.

“For me, the last year was a good learning experience,” said Sukhenko. “You can’t go in with all the bells and whistles and the technical aspects that all of us need to know. You need to tell a story and build trust. And that's the way to get to the rational.”


With credit-linked notes (CLNs) becoming the “best-traded product” across Europe, the Middle East and Africa (Emea) at Citi Global Wealth last year the bank went on an education campaign for the products in the first three months.

“Slowly, we became literate as an organisation, especially to the relationship managers [who] were carrying the messages,” said Sukhenko, adding that the wealth manager was contending with investors sitting in cash or buying government bonds.

The growth of CLN trades led to a record monthly volume at Citi Global Wealth last March. “[With] widening and narrowing and credit spreads, we continued to play into the space on fear of missing out,” he added.

Behind the successful story was tremendous effort that went into the discussions about the product design and the way to promote the products. “I keep telling my team, get out of your seat, talk to people in the kitchen, talk with people on the elevator, have your best ideas in your pocket all the time,” said Sukhenko.

The investment finance function within the wealth division also played a role in extending leverage, which came with majority of the CLN trades.

“That means the campaign hand-in-hand with the investment finance function was how can we use the CLNs as collateral in your portfolio,” said Sukhenko. “We can then lend you money through liquidity needs for the timing of cash flows, and that’s for the benefit of your return of equity (ROE).”

Investor behaviour

“I've never met rational investors,” said Álvaro Urien Luzón (pictured), head of regional private banking at Fineco Banca Privada Kutxabank, a Spanish bank where its assets under management reached €5 billion assets in 2023.

Behaviour is the third aspect and efficient frontier valued by the bank on top of the modern portfolio theory pioneered by American economist Harry Markowitz, which selects investments with a goal to maximize investors’ overall returns within an acceptable level of risk.

It is also the psychology of clients that Luzón contemplates when incorporating structured products into their portfolios.

At the panel, a live pool shows that more than half the respondents allocated 10% to 15% of their portfolios to structured products, which “isn’t unusual”, according to Luzón.

Structured products enable active managers to express their views beyond end customers, added the portfolio manager.

At Fineco Banca Privada Kutxabank, a variety of risk measures are used for structured products as the asset manager tries to figure how clients would behave if the worst scenario takes place, according to Luzón.

“It can be challenging to move in the right direction without the bridge to the behavioural part,” Sukhenko added.

Locking the rates

At Citi Global Wealth, callable fixed rate notes have fallen under the spotlight this year, aligning with its overall CIO view, which enable investors to extend investment duration by locking the interest rates before they go down as expected.

In the US, the Consumer Price Index for All Urban Consumers (CPI-U) report marked a second consecutive 0.4% month-over-month increase for February, above what economists had predicted.

Despite the hot macro data, the wealth manager still expects a near-term interest rate cut by the Fed and therefore continues to promote callable fixed rates note.

“The common denominator of all that is trust relationships, extending conversations, exercising over relationships and belief,” said Sukhenko. “I can see how the credibility through relationship managers is established and then we as product people can come in and support and push great ideas.”

Luzón at Fineco Banca Privada Kutxabank thinks it makes sense for investors to sell volatility for protection from a long-term strategic point of view.

“Our asset managers put that into our client’s portfolio through an investment fund,” he said. “We are tactically removing direct equity exposure, with some equity replacement strategies.”

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