Kempen has launched a 90% capital protected note in the Netherlands linked to the local AEX index. The VL 90% Index Garantie Note (IGN) AEX 17-23, which is issued via the merchant bank's parent company Van Lanschot, participates 100% in the performance of the index, capped at a maximum return of 160%.
In January, Kempen issued a product with exact the same conditions, according to Laurent Guntenaar (pictured), director, structured investments, Kempen. "That product had a subscription period of one week and was targeted at the more defensive investors, and, within our network, at private bankers and not so much our advisers. Bankers usually prefer to use simpler structures and this is of course a very straightforward product."
Despite the fact that it was such a simple structure, sales were not very good in the beginning, according to Guntenaar. "But eventually the note sold out during the first quarter. Then we had the choice to either raise the issuance with a second tranche or to issue a completely new product," he said. Kempen opted for the latter because the financial markets had increased so much in the meantime that "right now the price of the existing note is well above par", said Guntenaar. "So for us it was more attractive to come up with a new product against an issue price of 100% of the nominal amount."
This time the bank decided not to launch the product with a subscription period but directly via trading by issuance on the Amsterdam exchange. "This type of product is often available on the shelf for advisors and private bankers," said Guntenaar. "We have seen that with the first edition in January, which initially started slow, and we are hoping that once again the product will be picked up by our bankers during advisory talks and used in the defensive part of the investor's portfolio because of the capital protection."
The fact that the underlying AEX index closed at 524.05 points on April 25, its highest level since April 2007, is not the reason why Kempen came with this product, according to Guntenaar. "What we really want is to try and launch the same structure once every quarter, as long as the market conditions allow us to do that," he said. "We take the same structure and the same index because it increases the recognisability, not just with the client but also with the commercial guys [Van Lanschot private bankers and advisors]."
Earlier this month, Kempen launched a second tranche of the BNP Paribas Trigger Plus Note Eurozone 15-20, an autocallable with memory feature, of which the first version was issued in February 2015. This time the bank decided against issuing a new product but opted to raise the issuance instead, according to Guntenaar.
"The price of the original note was not far above 100%, so not far above par," said Guntenaar. "At the time we made the decision it was 101% and it was still attractive to issue a second tranche. But for the AEX note I think the price is now 104 or 105% and then it becomes a lot less interesting to raise the issuance because it would prevent a large number of investors from getting on board."
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