Crelan has become the first distributor in Europe to use the Solactive Atlantic Quality index as underlying for a structured product. The Belgian provider collaborated with Societe Generale for the 90% capital-protected SG Issuer (LU) Atlantic Quality 90, which offers 100% participation in the performance of the index, subject to a maximum capital return of 128%.
The components of the index, which was launched on October 12, 2015, are selected from the 600 largest market capitalisations in Europe and 500 largest market capitalisations in the US. "Earlier this year, we used the iStoxx Europe Quality Income as underlying for our structured products," said Filip Gabriels, head of product management (off-balance sheet) at Crelan."However [iStoxx Europe Quality Income] is limited to Europe. That's why we thought, also from the viewpoint of diversification, it would be beneficial to use an index with the same methodology, but then on both European and American stocks."
To calculate the return, the product takes the average of the 13 final monthly performances of the index since the strike date, something Gabriels sees as a positive. "We certainly see this as some kind of extra protection, since otherwise one result or moment in time is all important for the final return," he said. "[Not having averaging] could be a real disadvantage if, at maturity, a sharp correction takes place."
The note has a relatively short term (four years), which has been a feature in recent months, with four out of the last six products distributed by Crelan having terms of between four and five years. "In addition to products with a short term, we want to continue, where possible, to include products with a term of around eight years in our offering."
This year, Crelan has issued 15 structured products - each linked to a single equity index - in collaboration with BNP Paribas Arbitrage Issuance, Credit Agricole CIB, LCL Emissions and SG Issuer. "We are working with four counterparties," said Gabriels. "In future, we could expand the number of issuers." The increase in the number of issuers used by Crelan is due to demand from clients but also agents, according to Gabriels. "It helps to be able to provide the necessary diversification in the portfolio of our clients. To have always the same issuer in the same portfolio is something we want to prevent," he said.
Crelan is the result of the merger between Credit Agricole Belgium and Centea, which was acquired from KBC in 2011. The name Crelan was derived from Credit Agricole (the bank's name in Wallonia) and Landbouwkrediet (the bank's name in Flanders) and came into effect in April 2013. Since then, the bank has launched 41 structured products, worth €730m, and worked with 10 different counterparties, including Amundi, Caceis, dnA, SecurAsset, Societe Generale and Van Lanschot, amongst others.
The Solactive Atlantic Quality index comprises an evenly weighted basket (the weight of each share cannot exceed 5% or be less than 4%) of between 20 and 25 stocks, which are selected for their performance potential over the medium and long term via quality filters based on nine financial analysis ratios. Shares from the financial sector are excluded and the composition of the index is adjusted quarterly. On December 11, 2015, the index offered exposure to the following countries: US (48.5%), Great Britain (35.1%), Spain (8%), Italy (4.3%) and Belgium (4.1%).
Click here for the latest factsheet of the Solactive Atlantic Quality index.
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