There are many ways to start a career in structured products, and a variety of different views of what are good products. In a series of interviews, SRP asks market practitioners to reveal their thoughts about the market and the path they have taken to become part of it.
Nicola Francia, head of external network and public distribution of private investor products for Italy at Unicredit answers the questions.
What sells better, protected or non-protected products?
The capital protected products are the most sold in Italy, although interest for the non-protected definitely grew up during the last decade, thanks to the improvement of investors' financial education and low rates environment.
What are the prospects in your market for the next 12 months?
Structured products are facing challenging times across all Europe. I remain positive for the Italian market, issuers and distributors invested a lot on educational activity during the last years. Now the priority is to find a balance in the upcoming level of regulation. A fair level of regulation would create the base for a further sustainable expansion for structured products.
What was your first job?
Assistant fund manager on equity funds, but it was only for few months. I moved to structured products, in early 2000.
What subject did you study in higher education?
I have a degree in Business Administration at Bocconi University. The passion for financial markets rose during my exchange programme, with a professor who was a former Wall Street derivatives trader.
Are structured products complex investments?
Not necessarily. I am not a fan of complexity, I believe in the value to create a particular product's payoff, according to the investor personal risk profile. For some investors, simplicity is the right choice.
What is the main benefit of buying a structured product?
The great variety of solutions. Every investor can find the right combination of risk-return on selected underlyings, according the preferred time horizon. When this simple selection process follows the suitability criteria, the output is a perfect fit of product and investor.
Do you buy structured products, if so, which type do you prefer?
I like the combination of defined monthly coupon and barrier risk. This is a quite popular product in Italy, called cash collect certificate. The investor receives some fixed coupons and others conditional, with monthly European barrier observation. At maturity, the capital is guaranteed if the underlying is above the barrier.
Which is the best structured products market?
I might be biased, but I think the Italian market is the most complete and diversified in terms of solutions, underlyings (rates, equity, foreign exchange and commodities) and wrapping (bonds, certificates, insurance contracts and funds). I have a great admiration and respect for the German market as well. Their public distribution activity has been ahead of all the other European market for years, thanks to the concept of one stop shop, the low cost for issuing and listing, and a developed and mature investor base.
What's the best structured product you have ever seen?
I will always remember a series of reverse floater bonds listed to the MOT in Italy in 2010, when euro rates started to decrease. My favourite of the series paid two fixed annual coupon of 8% and coupons of 10% minus two times six-month Euribor thereafter. It matures in March 2018 and it has realised an extraordinary return during its life, compared to the average bond yield. The great intuition was to get a negative exposure to the rates with a perfect time to market.
Bicycle or taxi?
In medio stat virtus, as always....Taxi during the week and bicycle for the weekend.
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