Nagelmackers has introduced two structured notes linked to the Solactive Stable Income Europe Index. In doing so the Belgian bank became the first distributor to use the index, which was licensed to Societe Generale, as underlying for a structured product.

The Solactive Stable Income Europe Index was launched on April 5, 2017 and focuses on the stock market potential of a selection of European companies which, in future, should show a high resilience because of their substantial cash flows (measured by their free cash flows). The 50 stocks that are included in the index are taken from a universe of 675 European shares of the Solactive Europe Total Market 675 Index.

"The index comprises of companies that show resilient returns, also under difficult market conditions during possibly cyclically-lesser periods, thanks to their high cash flows," said Gianni Pauwels (pictured), product specialist life & structured products, Nagelmackers.

The generation of significant cash flows has a positive impact on the value of companies, according to Pauwels. "Abundant cash, which a company can utilize to pay dividends, invest in its growth or repay its debts, shows that a company is vital and financially healthy. So a high cash flow will also support the stock market valuation of a company."

During the development phase of this particular product, Nagelmackers had some concerns about the fact that the financial markets have been growing for a number of years now, according to Pauwels. "How can we protect ourselves against a possible market correction and at the same time have a story we can sell to our clients," said Pauwels. "That's how we got to the Solactive Stable Income Europe. The index was offered to us by Societe Generale who hold the license."

The new products are issued via Societe Generale and Codeis Securities (the SG special purpose vehicle), respectively, with one fully protected and the other putting 20% of the nominal at risk. It's not the first time Nagelmackers has distributed two products with different levels of capital protection simultaneously, and, according to Pauwels, the approach works well. "The last campaign we did we saw an increase of 10 to 15% compared to the previous campaign. We see a positive trend and the feedback from our network is positive too," said Pauwels.

Every year, both products offer a possible coupons equal to the annualised performance of the index. The last time Nagelmackers distributed a pure income product was September 2013 when Delta Lloyd Codeis Securities SA (LU) Flexible Funds D was launched. "We had a number of significant maturities this summer which had the same format," said Pauwels. "Not only did we want to offer our clients once again a product that has the possibility of an annual variable coupon but also because it has been a while we have offered such products for the portfolio of our clients."

Nagelmackers has distributed five structured products year to date in Belgium, according to SRP data. The SRP Belgium database lists 60 structured products from Nagelmackers, dating back to May 1998. Of these, 36 products with combined sales of €620m are still 'live' including 26 structures distributed under the Delta Lloyd Bank brand (the bank's previous name).

Click the link to view the Solactive Stable Income Europe Index guideline and the latest factsheet.

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