More volatility in Asian structured products market in 2018, OMGI

In the second part of an interview, Carol Wong (pictured), managing director for Asia Pacific at Old Mutual Global Investors (OMGI), talks about investor preferences and structured products in Asia as well as the company's initiatives in the region.

"[When it comes to investor preferences], as long as they know what they are investing in, the underlying is not so crucial, if there is capital protection," said Wong. "[Investors] would look at how many years they have to hold the structure for, the capital protection level and the kind of return they can get," she said. "Thus, they tend to pay more attention to the features of the structure itself rather than the underlying." The only caveat is, the underlying must be explainable. "In terms of tenors, people prefer around two to three years. Sometimes, we also see one year, but the upside would be quite limited for very short tenor."

Capital protection usually varies from 90% to 100% in the region, according to Wong. "Capital protection is definitely driving the market in Asia," she said. "Given the low interest rate environment and volatility in the market, people want their capital protected," said Wong.

"Additionally, structured products are here to provide liquidity on some underlying asset classes that may not be as liquid and this is a driver of activity, too," said Wong. Leverage "stimulates the investors' interests" in such offerings, according to Wong

Low interest rates have led to the majority of flow in the past year being based on fixed-income products, according to Wong. "Our market neutral fund is popular among investors due to its extremely low volatility and higher return than deposits," she said. "Therefore, when people want better return given the low interest rates, these are the relatively safer alternatives."

"We expect more volatility in the market," said Wong. "Valuations have been high, especially for the US, but we are seeing lots of money packed in fixed income because investors still think that there are a lot of uncertainties in the market. That is why they have not moved the majority of the assets to equity yet."

This year, OMGI has introduced more alternative strategies. "These include some hedge funds, some unique products, like gold and silver, which will be a good hedge if the market is not performing well enough, as well as some niche asset classes such as contingent convertibles (Cocos)," said Wong. "We just launched one in July that provides a relatively attractive yield, close to 6% in US dollar terms, and it is a growing asset class that offers a very good alternative in such an uncertain market environment."

The main differentiator for the company is that it does not have a chief investment officer. "We give autonomy to our managers so they can have the freedom to apply their own investment approaches under a robust corporate and risk management environment."

Additionally, the company has "a unique approach as an active fund management firm focused on alpha generation", said Wong. "Also, we have a number of unique products that are selling well and that [make us] stand out." OMGI has a market neutral mutual fund based on a quantitative model and managed by an experienced team, according to Wong. Since 2014, the company won over 90 industry awards, according to Wong.

"This proves that we are very strong in delivering performance to our clients, and, though OMGI is relatively new in the market, we have already established a very good foo print in the UK as well as internationally," she said.

Low interest rates are fueling the search for yield, SGX

We offer a greater range of warrant types than our competitors, Citi

Asian investors to emphasise on ESG/SRI investments, Natixis (Part 2)