Assets under management held in alternative and structured products within BNP Paribas Investment Solutions have declined from €64bn at the end of 2010 to €54bn as of the end of September 2011, according to the recently published Q3 results.
This decline of 15% in the first nine months of the year for that market segment is stronger than the overall decline in assets under management over the same period, which went down from €457bn to €416bn, a 9% decline. Shares were the only market segment experiencing a steeper fall in assets under management than structured products, with a fall of 21% over the period. The bank blames both the sharp decline in equity markets that reduced the value of the portfolios and asset outflow as investors grew increasingly averse to risk. Only bonds saw their assets under management increase slightly over the first nine months of the year.
SRP data corroborates this decline in assets under management for the structured products activity of BNP Paribas.
By the end of the year, BNP Paribas will have seen €2.7bn maturing across 24 products. However, the group has been able to roll over less than half of these maturing investments, as BNP Paribas is expected to only gather €1.2bn of new sales over 2011. This obviously shrunk the assets under management held by the group within its structured products business, which BNP Paribas attributes to three factors.
The first is the general macro-economic environment, as most of the products maturing now were launched in 2005 or 2006 in times of greater economic stability. Most providers have reported a decline in sales over the second half of 2011, due to worries about the stability of the Eurozone.
The second is that out of all BNP Paribas's maturing products this year, the average performance is estimated to have neared a low of 0.8% pa (based on a sample of 18 BNP Paribas products maturing in 2011). Half of the €2.7bn of maturities was concentrated in just three products offering only limited returns: Hawaï (€651m of investment back in 2006) delivering 1.33% pa, Gulf Stream (€337m of investment back in 2003) delivering 1.5% pa and Garantie Jet 3 (€312m of investment back in 2001) returning only the capital invested.
Finally, the third explanatory factor is that the life insurer of the group has been interpreting the French supervisory authority's recommendation issued at the end of 2010 very stringently, effectively freezing the sale of non-CPPI structured funds within BNP Paribas life contracts through 2011.
As part of its results announcement, BNP Paribas reported a net income of only €541m for Q3 2011. This figure was down by a huge 71.6% compared to the same time last year, mostly attributable to the bank's exposure to Greek sovereign debt. The group detailed its overall exposure to euro sovereign bonds, with the latest figure showing a current exposure of €1.6bn to Greece (sharply down compared to four months ago due to the depreciation of that debt), dwarfed by its exposure of €17bn, €15bn and €20bn to Belgium, France and Italy, respectively.