Environmental and social governance (ESG) structured products are increasingly included in investment portfolios, and no longer the domain of utopian and visionary fixed income investors seeking a ‘feel good factor’.
This report is SRP’s attempt to shed some light on an area of increasing activity in the structured products market, by providing a comprehensive overview of the ESG structured products market with a timeline of the most significant developments covering the period from 2013 to 2018. It also includes a profile section with a selection of some of the most relevant index providers and manufacturers, as well as a country-by-country analysis, and a survey polling a selected number of senior executives from the buy-side.
NB: this report was updated in November 2019 to reflect some changes to the data.
The shift towards automation in the structured products space has happened on the back of new regulatory requirements, increasing costs, and a renewed focus on efficiency and transparency. The need to streamline processes in all parts of the market is pushing market participants towards platforms, which are gaining huge traction among buy- and sell-side firms. SRP's Platforms Report, now in its second edition, attempts to shed light on some of the key drivers of electronic trading of structured products, but also some of the challenges that remain.
SRP’s second France report, in partnership with the French structured product association (AFPDB), provides an analysis of the performance of structured retail products that matured, expired or paid a regular income between the second quarter of 2018 (April 2018) and the first quarter of 2019 (March 2019).
The analysis encompasses 318 products that matured or autocalled in that period, of which 99 reached their maturity date while 219 expired earlier. Ninety-four of these products delivered a positive return at the end of the investment term (3.3 years on average), according to SRP data. Sixty-nine percent of the products returned 5% or more.
This report analyses the performance of subscription-based structured retail products marketed in the four Nordic countries: Finland, Denmark, Norway and Sweden. SRP analysed the last 10 years of products and decided to answer the question: do structured products deliver on what they promise? The conclusion is, overall, a positive one. The report’s primary finding is encouraging: structured products averaged a 3.38% annualised return between 2009 and 2019Q1, and, crucially, performance has been increasing since 2009 in spite of the lasting effects of the financial crisis and oil price volatility on the capital markets as a whole.
From all the products with performances, more than 78% of the products which matured between 2008 and Q4 2018 delivered a positive return at the end of the investment term (three years on average), according to SRP data.
A key conclusion from this report is that structured notes have delivered positive returns to investors in the US over the last 12 years. With an average return of 4.36%, which includes the extreme negative performance during the global financial crisis, the results showcase the capacity of structured products to deliver what they promise.
One example of this is that forty-one percent of structured notes generated an average return of over 10% per annum, showing that these products deliver a positive and high correlated with equity markets performance.
SRP’s inaugural France performance report, done in close partnership with the French structured product association (AFPDB), covers the period from 2007 to the beginning of 2018. It accounts indirectly for the consequences of one major systemic crisis, several regional crises, as well as a fundamental overhaul of the regulatory framework, which culminated with Mifid 2.
The study shows, however, that structured products have proven that they deserve to be an integral part of French retail investor portfolios, allowing access to rewarding strategies while diversifying risk exposure.
Over the last 10 years, structured product providers have developed fully integrated, internet-based services and solutions with a focus on financial institutions, private banks and product distributors. During that time, most active banks have built their own single-issuer platforms as a way of capitalising on technology developments and automation, reducing production costs and adding scalability to the market. Customisation is another strand in the technology story, providing the ability to create tailor-made products at the point of sale.
This report looks at if and how platforms are helping issuers to automate processes, become more efficient and service clients better.