LBBW launches new tracker linked to ‘blockchain’ firms

Landesbank Baden-Württemberg (LBBW) has launched on the Stuttgart and Frankfurt Exchanges a new open-end tracker certificate linked to a proprietary index comprised by companies using distributed ledger technology (DLT), known as Blockchain, which is calculated by Solactive.

The timing of this product is not accidental as demand for products offering exposure to blockchain technology and cryptocurrencies has increased significantly over the last few months, according to LBBW certificate expert Steffen Bauer (pictured).

"Many of our customers ask for blockchain technology or cryptocurrencies products [and] we decided to develop a long-term retail product focused on blockchain technology," said Bauer, adding that LBBW has other research linked indices integrated into the investment process. "LBBW currently has three open-end indices professionally managed by Solactive."

The product tracks the LBBW Research Blockchain-Favoriten Aktien-Index (ISIN: DE000SLA5T80) one to one and includes a callable feature that gives the issuer the right to terminate the product early in case of adverse market movements, a common payoff structure in the German market.

The first open-end index certificates linked to the LBBW Research Nachhaltigkeits-Favoriten Aktien-Index (ISIN: DE000SLA42E8), were brought to market in 2016. Since then, LBBW has launched a number of products linked to another index within this series, the LBBW Research Favoriten Aktien-Index (ISIN: DE000SLA1JF1).

The index is comprised of ten equally weighted assets selected by the research analysis team and is rebalanced quarterly or after a trade, according to Bauer. The geographic exposure of the index is currently confined to the European market, but addition of non-European businesses that meet LBBW's criteria is not excluded, said Bauer.

"There is an analysis of the fundamentals, including the valuation before a stock is included in the portfolio," he said. "If one share is exorbitantly expensive in the market or industry comparison, there would have to be very good other reasons for inclusion [such as] high dividend yield or price potential."

The decision to build an index tracking firms involved in distributed ledger technology (DLT) in various industries at this particular time has a historical background, according to Bauer. "LBBW has already conducted [its] own projects concerning blockchain technology," said Bauer. "In 2017, Daimler and LBBW successfully utilized blockchain technology for the launch of a corporate Schuldschein [...]. This year, Telefónica Deutschland placed a Schuldschein with a blockchain tranche exclusively arranged by LBBW. This was the first time a double-digit number of investors participated in such a blockchain transaction."

Regardless of new investment opportunities around new themes such as blockchain, traditional investment products and payoff profiles continue to drive most of the market's activity, according to Bauer.

"These include partial protection products such as express certificates or reverse convertibles," he said.

LBBW leads the issuance and sales volumes rankings in Germany's structured products market, including non-retail, leverage and flow products, according to SRP data. In 2017, the state-owned bank mark took 23% market share across an estimated €2.1bn in sales, followed by Vontobel (18%/€1.6bn), and Unicredit (14%/€1.2bn). YTD, LBBW remains at the top of the market with a 33% market share across an estimated €1.2bn in sales.

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