The future in Sweden is derivatives-based

Sales volumes of structured products sold in Sweden during the first seven months of 2017, at SEK6.3bn (€662m), were down 28% year-on-year, according to the SRP database. Compared to the same period in 2015, when sales of SEK18.2bn were recorded, the gap was even wider (a 65% decrease). Issuance was down too. Four-hundred and forty-nine products had strike dates between January 1 and July 31, 2017, a decrease of 42% and 23%, respectively, compared to 2015 and 2016.

"We have seen overall volumes shrink over the past two years due to big banks being weighed down by Mifid implementation projects and persistent non-beneficial media coverage taking its toll," said Mikael Axelsson (pictured), chief executive officer at Garantum. Axelsson, however, remains optimistic.

"The new rules will level the playing field for investment products and opportunities for alternative pay-offs when interest rates are super-low and valuations in many equity markets are super-high will be immense," he said. "The future is derivatives-based."

Garantum saw its sales volumes shrink too, from SEK5.9bn during the first seven months of 2016 to SEK2.1bn this year (2015: SEK3.8bn), although the company remains the most prolific distributor in Sweden, with a share of 33% of the market.

Apart from adapting to Mifid 2 and Priips, 2017 has been very much about raising the public profile of structured products in the Nordic markets by countering some of the common misunderstandings about this investment type in both traditional and social media, "a long-term initiative", according to Axelsson.

"We are also working hard to utilise new technology in order to reach the right people at the right time with the right offering," he said. "Combine that with the build-to-order capability of the structured products industry and you will have something very powerful."

Axelsson is excited about the prospect of engaging more with the rest of the investment community, including media reporters and "perhaps help them get a deeper understanding of what the contribution of derivatives-based investment solutions really is". "You can call me naïve, but I firmly believe we ignore such a discourse at our own peril," said Axelsson. The new head of the Swedish industry association, Fredrik Bonthron, will be perfect for driving that agenda, according to Axelsson. "He had only been in office for 12 days when he did his first interview with a national newspaper at the end of June," said Axelsson. "He aced that interview. So the race for giving the public a truer image of structured products is on."

The 449 structured products which struck during the first seven months of 2017 were predominately linked to equities. More than 50% of the issuance (246 products) was linked to a basket of shares with a further 20% (86 products) linked to a single index, including offerings linked to the OMX Stockholm 30 (34 products), Solactive Global Ethical Low Volatility SEK Hedged Index (14) and the Eurostoxx 50 (11). Fifty-four products were linked to credit; three products to FX rates; and two products had a fund as underlying.

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