Belgian association reports renewed focus on fixed income instruments

Turnover of structured products with a fixed income underlying increased by 46% year-on-year, from €206 million to €301 million, although the same asset class registered a 2% decrease on the previous quarter, according to the association.

The volume of structured products sold back onto the secondary market amounted to €998 million, an increase of 16% compared to the second quarter and 12% compared to the same quarter last year.

Investors use structured products to track changing market trends, said Florence Devleeschauwer (pictured), chairwoman, Belsipa, commenting on the results. ‘Investments of retail customers experienced a shift from equity-linked products to products tied to a fixed-income underlying,’ she said.

Filip Gils, vice-chairman, Belsipa, added that structured products allow for a flexible and proactive adjustment of retail portfolios. ‘The renewed interest in structured products linked to a fixed-income component indicates that financial markets anticipate a slow rise in interest rates in the Eurozone,’ he said.

At the end of September 2018, over 3,200 products with an outstanding volume of €31 billion were 'live' on the Belgian market, roughly the same as at end-July when the volume of open/non-matured products stood at €31.1 billion. However, compared to the third quarter of 2017 the outstanding volume decreased by 5%.

In Q3 2018, equity-linked products sold €560 million on the primary market and €874 million on the secondary market while products with a commodity underlying, which are rarely seen in Belgium, sold €17 million on the primary market and €29 million on the secondary market. Significantly less structured products (29%) were sold on the primary market with a capital protection feature in Q3 than in Q2.

Eight hundred and two new structured products were issued in Belgium between July and September 2018, up 26% from Q3 2017. The vast majority of all new products (704) were issued in the leveraged segment (+156% from Q3 2017). There were also 78 structured notes (+26%); 13 structured insurance products (+8%); and seven structured funds (-30%). Measured by underlying type, equity-linked instruments represented a share of 85% of all newly issued products. Compared to the last year equivalent quarter they increased by 128%.

Belsipa was founded in 2013 and has Belfius, BNP Paribas Fortis, ING Belgium, KBC, Société Générale, Commerzbank and Natixis as full members. Next to them, also Axa Group, Crelan, Bank Nagelmackers, AG Insurance and Deutsche Bank provided data to the report, which covers approximately 95% of the Belgian market.

Click the link to read the full Belsipa market report on retail structured products for Q3 2018.