Financial products issued specifically to coincide with major sporting events as well as structures linked to market trends and geopolitical events can serve as portfolio additions, and opportunistic trades. Over the last week, the number of products linked to political events such as the Italian election results and the upcoming World Cup have mushroomed in Europe.
Leonteq has launched over the last couple of weeks a number products playing on investors' fears that Italy will leave the Euro, and the dramatic fall of the Italian two-year bonds at the end of May. Among these was a fully protected callable credit linked note (CLN) linked to the Republic of Italy as well as a number of other structures linked to Italian assets.
"We've seen an increasing demand for Italian related equity (both long and short) as well as credit investments over the last two weeks," said Manuel Duerr (pictured), head of public distribution at Leonteq, adding that the firm has also marketed both bullish barrier reverse convertibles as well as inverse barrier reverse convertibles on Italian banks "where clients benefit from higher implied volatility levels in form of a higher coupon for the same protection level compared to two weeks ago".
In Germany, Vontobel launched three put and one call turbo warrant with stop-loss linked to the Unicredit stock while Commerbank opted for a bull-bear warrant with a return equivalent to a leveraged long (call) or leveraged short (put) position on the Unicredit stock if the underlying is not at or below (call) or at or above (put) the start level at maturity.
Duerr also noted that products addressing positive/negative sentiment about the wider EU are also in focus via inverse autocallables on EUR/USD exchange rate.
Structured products issuers have also reacted to the upcoming 2018 FIFA World Cup in Russia with a number of products featuring sponsors of the event being launched in the run up to the tournament.
In Switzerland Leonteq has launched three callable multi barrier reverse convertibles linked to baskets of shares from companies involved in the World Cup such as Adidas, Coca Cola, McDonalds or Visa. Other markets featuring World Cup related products include Germany/Austria (nine), France (four), Poland (three), Luxembourg and Finland (one apiece). Vontobel has been the most active provider with several put and call turbo warrants, and an express certificate linked to World Cup sponsors in Germany, with Commerzbank also issuing warrants linked to Coca Cola and McDonalds in France. In Poland, Alior Bank marketed two structured deposits linked to World Cup sponsors.
In Belgium, Binck has put together its own 'World Cup selection - World XI trackers', a world team consisting of 11 regions and 25 trackers, each representing one - or a group - of the 32 countries participating in Russia. The selection is based on a list of exchange-traded funds (ETFs) in which the online brokers clients are currently investing.
According to Bink, historical figures show that the economy and the financial markets in countries that win the World Cup often experience a temporary boost. The selection of regional trackers popular with Binck investors is primarily intended as a geographical source of inspiration.
Despite all the buzz around sporting events, a survey (Financial Products and Sporting Events) by the German Derivatives association (Deutscher Derivate Verband -DDV) published today (June 15) found that German self-directed investors prefer core products with attractive risk/reward profiles.
In today's challenging capital market environment, core investments remain private investors' first choice, according to Lars Brandau, managing director at the DDV.
'Events of this kind do have an impact on the markets, but the effects are often short-lived,' said Brandau. 'With this in mind, investors should not overrate such offerings: they should examine them carefully and seek comprehensive professional advice.'
According to the DDV survey which was based on 1,642 answers from investors in an online poll, just one in nine private investors in Germany is interested in financial products which are issued specifically for major sporting events such as the Fifa World Cup, and used as short-term additions to portfolios. Seventy nine percent of the survey respondents have no interest whatsoever in investing in such products while just under 10% would consider using financial products of this kind but do not believe they are compatible with their own long-term investment strategy.
There are more than 50 structured products featuring sports events on SRP's database of which four products sold in Germany/Austria are still live.
Other assets related to multi-million dollar growing industries such as cannabis, bitcoin and blockchain have also been popular recently. A popular investment theme across North America, cannabis is gaining increased traction in Europe. SRP has recorded over 384 structured products in Germany and Austria linked to companies involved in the cannabis industry, of which 262 products are still live. Most recently, Swissquote has launched the Swissquote Cannabis Portfolio which was deployed by Leonteq in a delta-one certificate traded on the Swiss stock exchange (Six), offering exposure to a portfolio of cannabis industry listed firms.
"The initial feedback has been overwhelming," said Duerr. "Our tracker certificate on the Swissquote Cannabis Portfolio was one of the most traded securities on Six Structured Products exchange over the last couple of weeks."
The exchange traded product is up 25% in two months making it one of the best-performing Six-listed investment products during this timeframe.
The product provides exposure to companies with significant business activities in the cannabis industry. Components are selected at the discretion of the index sponsor (Swissquote) using filters including cannabis industry focused business strategy, majority of revenue generated directly from the marijuana industry and proprietary quantitative analysis. Further, stocks have to meet minimum trading criteria such as a minimum markets capitalization of US$50m, average daily trading volume of US$100,000 and a stock price above US$0.10. If other companies fulfil the above mentioned criteria (e.g. IPO), Swissquote will include them in the portfolio and therefore broaden the diversification even further.
Additional reporting Marc Wolterink.
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