HSBC on track to deliver click and trade set up to clients

In the second part of an interview, Patrick Kondarjian (pictured), head of structured equity & cross asset third party distribution, Europe, Middle East & Africa (Emea) sales, at HSBC, talks about the bank's renewed impetus around public offerings, the focus on its click and trade technology platform, what products are on scope and how regulation could help the industry to move to new heights.

"Public offerings represents a very small sub-set of our overall activities around structured products but we are happy with how we have come back in the UK," said Kondarjian. "The idea is to grow the business gradually, and create trust between the organisations, as well as contribute to increase the pool of counterparty providers for the benefit of the end investor. We are laying the foundations to build up our offering and increase our footprint by leveraging our brand, product offering and service while being selective and operating within a controlled framework."

The bank's non-retail activity was "very positive" in 2017 with significant volumes across private banking and asset management in the UK, Switzerland and a number of other European markets, according to Kondarjian.

"We had a good year and capitalised on the market environment to start building our technology platform to be able to offer an automated click and trade set up for our clients," said Kondarjian. "We have also joined a number of platforms and we're providing pricing on a number of markets via platforms. We have also put in time and effort to grow our product offering."

The bank remains on the growth course and believes new regulation "will help to grow the overall market pie, and remove any bad practice and bad apples", according to Kondarjian.

The implementation of Priips has been "painful" for the whole market during the preparation phase in 2017 "but not been particularly problematic in 2018" as the bank was able to meet the new Kid requirements for most its payoffs, according to Kondarjian.

"Some banks were not as ready as expected but overall the whole industry has moved from transition to the new regulatory set up," said Kondarjian, adding that sales volumes across retail, private banking and discretionary managers have not been affected "which shows that the new rules have not disrupted overall market activity".

"There are issues to be resolved around the comparability of the numbers and inputs around models, risk calculations and other issues (stress testing, forward looking scenarios...). But the industry, through working groups (Eusipa, UK SPA), is committed to find solutions and create a 'golden standard' to limit interpretation. "

Despite constrains around pricing because of low vol /low interest rates, and high levels on most indices investment activity remained stable in Q2 although "it seems that investors are in a wait and see mode, and some have moved assets from equities to fixed income", according to Kondarjian.

"We have also seen significant activity around US interest rates and around credit," he said, noting that there is also a lot of interest around quantitative strategies including risk premia, or factor-based solutions.

"In terms of pure risk premia, we think it might be too early for retail investors because of the complexity. The UK market is very standardised and this kind of risk premia strategy would not resonate with investors, but if you move higher on the ladder to private banks and discretionary managers there is occasional interest while investors in some of the more developed markets such as Switzerland are already seeking exposure to this kind of payoff."

According to Kondarjian, alternative indices such as low vol /high div, and decrement indices have been very popular in the market whereas in the ESG space, "which is a growing theme and resonates well with the millennial investor base", the bank has also been active.

"Institutional investors have already started to deploy these strategies and are embedding them in their asset allocation mandates, whereas in the private banking and retail segments they are developing at a slower pace," said Kondarjian. "The challenge here is to increase awareness and educate those facing end investors about the benefits of ESG around performance and risk, as opposed to perceiving it just as a feel good factor."

Kondarjian noted that all markets in Europe are potential targets under the bank's new selective approach.

"Our plan is to replicate the UK model in other markets were we resumed our public offering activity," said Kondarjian. "In Germany, we have a very well-grounded listed business and in France we're also increasing our activity. There are a couple of other European markets we're looking at closely, considering our options to re-enter them."

HSBC Private Bank appoints global head of markets products

HSBC partners with MSCI to develop ESG range targeting long-term risk