In the second part of an interview, Emmanuel Lefort (Pictured), head of global markets, Asia-Pacific at Natixis talks about the French bank's structured products, the cultural challenges to overcome in Asia-Pacific, and his views on platforms, regulation and the way ahead.
There are several factors that favour Natixis in the region, according to Lefort. "We are relatively new to the market and our signature provides a good way to diversify counterparty exposure," said Lefort. "Natixis has an 'almost perfect equity story' with no negative quarterly results in the last eight years. We also have very comprehensive structuring and trading capabilities."
The bank's strategy is "also" to align businesses within but also across divisions, such as a global finance line that works with real assets, including infrastructure, aircraft, energy and commodities. "Investors in Asia are yield-hungry and we are committed to delivering that yield, either via vanilla products or repackaged solutions," said Lefort. "Together with our European and US debt capital markets teams, we provide structured solutions to European and US issuers to lower their cost of funding and provide exposure to other markets via simple solutions."
The French bank's approach to innovation is not based on complexity, but on providing access and exposure to assets that will deliver value to investor portfolios by adding simple tweaks to plain vanilla products, such as a cross-currency swaps to capitalise on the positive momentum of the basis market, according to Lefort. "That serves well both the issuer and the end investor," said Lefort.
Other areas of development in Apac will be around leveraging the bank's knowledge and access to the European market and will be used "to bring Apac issuers into the European market with products that are denominated in euros", and also around the development of the bank's securitisation business, "with which we believe we can extract value from assets and deliver the returns investors want".
There are opportunities "in each and every market" in the region, although each market has its particularities and differ by the nature of assets, yield targets, and regulation, according to Lefort. "The products in demand for Japanese investors are different to those required in Taiwan, South Korea, Singapore or Australia, but there are also commonalities between the markets, such as the fact that in most Apac investors are yield-hungry and seeking local growth-driven yield-enhancement solutions."
Falling margins and the arrival of multi-issuer platforms address the low margin environment in the region and automate price discovery and issuance, according to Lefort. "This is also a reflection of how the digitalisation of some functions is helping to facilitate and simplify the way investors access these products, but also to automate compliance and so on," said Lefort. "However, we don't think this gives us a particular edge as an issuer, because we the key to success in this market is to develop and nurture your relationships with clients.
"In 2017, we want to grow our footprint and invest in the markets where we operate," said Lefort.
There is still uncertainty in the market around the actions of the new US government, and national elections in France, Italy and Germany, and some markets are pretty elevated, which does not provide appealing entry points, according to Lefort. "This could have an impact on investors' willingness to invest in the equity markets, but we remain positive that structured products can offer alternatives around assets and markets to provide meaningful solutions either in the retail or the institutional side," said Lefort. "This year, there will be also room for contrarian offers to address client needs and provide risk diversification. We invested heavily on our global markets activities in 2016 and we expect to harvest and capitalise on our position in some of those markets."
Regulation is not a problem although it would have to be dealt with, according to Lefort. "Investors will be more impacted by regulation because some of the increased costs of running businesses will be passed onto them," said Lefort. "The fact that we have to invest more and improve our processes to address regtech might slow down activity, but new capital requirements will make the market more robust.
"The only concern is that, because of regulatory constraints, investor choice could be more limited," says Lefort.
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