Credit Mutuel Arkea's bets on defensive structures to offer diversification

Defensive structures that provide a better chance to trigger early redemption, as well as products paying regular coupons even when the underlying falls dominated the first quarter of 2017 in the French market, according to SRP data. Falling barriers and more frequent observation dates have been regular features in France year to date.

Federal Finance Gestion, the asset management subsidiary of Credit Mutuel Arkéa has launched Autofocus Rendement Mars 2017, a seven-year fund designed for investors' portfolios diversification. The phoenix-type structure offers an annual coupon of 4%, provided that the Eurostoxx 50 has stayed above 80% at the annual observation dates. The fund is nonetheless well equipped for a bullish market scenario offering a one-off 6% coupon and early redemption if the index has stayed stable or increased at the annual valuation dates, according to Guylène Dassé (pictured), product specialist asset management and structured products marketing at Arkéa Investment Services.

"With Alcanterra April 2017 [a medium-term note distributed by Arkéa Investment Services and Arkéa Banque Privé in March], the trigger goes even down to -20% at maturity, with which investors are still entitled to receive an overall 180% return," said Dassé.

The 10-year Luxembourg Stock Exchange-listed MTN is linked to the Cac Large 60 index which has been developed by Natixis to give clients a market access to an equally-weighted broader universe than the Cac 40, the index presents various advantages, according to Dassé.

"We consider the Cac Large 60 fully appropriate for structures that combine yield and an early redemption feature," said Dassé. "The index offers exposure to the 60 largest French companies listed on the Paris Stock Exchange, hence providing for a wide sector diversification. In addition, the fact that the index is sponsored by a well-known sponsor [Euronext] makes it transparent and readable by investors."

The index is calculated with reinvested net dividends, and a substracted flat rate of 5% per annum, which allows to optimize the pricing compared to the Cac 40, according to her. "Last but not least, the equal weighting of the constituent shares limits the risk incurred on each of them," said Dassé. "We analyze carefully the positions of the AMF concerning the structured products market. Our commitment is to offer to our clients the solutions that are most adapted to their needs in a demanding regulatory environment."

This approach clearly addresses the restrictions introduced earlier this year by the French regulator - Autorité des marchés financiers (AMF), on the number of mechanisms to indices used in products eligible for public offers with an update to its guidelines regulating the commercialisation of complex financial instruments.

Arkéa Investment Services is also distributing Malaga April 2017, which is available for subscription until April 15, and "has been designed as a diversification solution for holders of life insurance contracts invested in euro denominated funds", according to Dassé.

"For diversification of corporate treasury, Federal Finance Gestion created Autofocus Pro March 2017, a six-year bespoke solution offering a 2% coupon per annum if the Eurostoxx 50 index is stable or rising, while protecting the capital up to a 70% fall in the underlying," said Dassé.

According to SRP data, one hundred and thirty-eight of the 150 new products with strike dates in France this year were linked to a single index. Although indices with embedded strategy have gained in popularity throughout 2016, the Eurostoxx 50 has held firm, featuring in 65 products year to date; 23 products were linked to the iStoxx EWC 50 while eight products were linked to a single share. The Cac 60 Equal Weight ER was used 20 times as underlying during the 1Q2017 representing an issued nominal nearing €0.9bn year-to-date, according to SRP database.

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