VDK Bank has launched the Purple (LU) Quality of Life 40 Coupon Note 2027 in Belgium. The capital protected note offers investors an annual coupon equal to the annualised performance of the Solactive Quality of Life Select 40 Index, subject to a maximum of 3% per annum.
The Flemish savings bank, which has its headquarters in Ghent, is the first distributor in Belgium to use Purple Protected Asset, the special purpose vehicle (SPV) of Natixis, as the issuing party for a public offer, according to Thomas De Nil, product management investments, VDK Bank.
"It's true that Purple Protected Asset is used for the first time for a retail emission in Belgium but we have used it before for private placements," said De Nil. "On previous occasions we have used Codeis Securities, the Societe Generale SPV, and SecurAsset, the vehicle of BNP Paribas for our structured products."
To fulfil its obligations, Purple Protected Asset, on the one hand, will open a term deposit with VDK Bank to secure the repayment of the nominal invested on the maturity date, while on the other hand the SPV will engage in an index-based swap agreement with Natixis, to be able to pay the potential annual coupons linked to the performance of the index.
The Solactive Quality of Life Select 40 Index, another first for the Belgian market, comprises 20 stocks from US companies and 20 stocks from European companies which are active in sectors and industries that cover six different topics and fulfil certain criteria according to liquidity and volatility. "This index was recently launched and was designed by Natixis based on research," said De Nil. "The index looks at long-term trends. Quality of life in the broadest sense of the word. Health, water, the environment, welfare, recreation and the like," said De Nil. "These are themes that are quit broad, but in our view they provide a long-term perspective."
Most of VDK Bank's structured products are fully capital protected and denominated in euros, hence their term is often longer - between eight to 10-years - and therefore most clients tend to prefer annual income, according to De Nil. "This is a product with a maturity of 10-years and for products which have a longer investment term, I think clients are asking for some return instead of having to wait 10-years to see their return," he said. "In my view, the longer the duration, the more interesting it is to offer the possibility of annual coupons, which, of course, is based on the performance of the underlying index," said De Nil.
"Almost all of our products protect 100% of the capital invested. That's correct. We have a fairly defensive clientele and capital protection is something that is important to them."
VDK Bank has actively been distributing structured products to retail investors in Belgium since 2013. Sixteen structures, worth a combined €128m, are currently outstanding, including offerings issued in collaboration with Credit Suisse, Codeis Securities, Natixis, Purple Protected Asset, SecurAsset, SG Issuer and Societe Generale, according to SRP data.
Click to link to view the Solactive Quality of Life Select 40 guideline and the latest factsheet.
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