The structured note arm of commodities specialist Marex Spectron has rolled out a landmark tier 2 capital structured note.
Marex Financial Products has launched a 5.5-year Swiss franc subordinated note with 100% principal protection and an annual coupon of 2.55% plus upside participation in the Swiss Market Index at maturity. The structured note was created in partnership with two undisclosed investment banks and law firm Hogan Lovells, and responds to increasing demand from investors turning to structured notes to get yield.
“Investors are worried about capital preservation, starved of yield, and worried about missing any long-term equity rally,” Marex Solutions chief executive officer Nilesh Jethwa (pictured), told SRP. “This is an elegant solution to provide clients with a principal-protected product paying a large annual coupon plus uncapped SMI upside. The investor base was Swiss and given negative interest rates there, this is particularly interesting.”
As investors are increasingly looking for yield, Marex’s subordinated programme offers an appealing alternative to classic structured notes, according to Joost Burgerhout (pictured right), head of Marex Financial Products.
“In an environment with near zero or even negative interest rates, providing a note with an attractive yield and a market-linked participation is an alternative option for investors looking for a regular income and the potential to benefit from an increase in the equity markets,” he said. “This is our first tranche of a limited number we will issue under this program and plan to issue more in 2021.”
With negative interest rates across the world, investors have struggled to find meaningful positive yields. At the same time, extremely resilient equity markets mean that anyone who didn’t invest in equities in the last decade missed out on very large gains, according to Marex.
The note can simultaneously provide high interest rates plus exposure to any growth in the largest Swiss equities. In addition, 100% of the principal is protected. The notes qualify as Marex Financial tier 2 capital and are approved by the Financial Conduct Authority.
The note combines the flexibility of a structured note and the additional yield through subordination, and has already proven popular with professional investors, stated the firm.
Jethwa noted that Covid-19 pandemic has created unprecedented uncertainty and investors are increasingly concerned about capital preservation. “This new type of instrument allows them to preserve their principal, have a meaningful annual income and retain exposure to any equity upside. We’re grateful to our partners, in helping us break new ground," he said.
Marex Financial entered the structured products market in early 2019 and has transacted over 100 structures with over US$1 billion traded. The firm launched its own structured investment product issuance programme for equity, credit, FX, commodity and fund linked notes after testing appetite for its structured investment products via third party issuers in 2018.
Marex also pioneered the first fully automated structured note cleared, settled and registered on a public blockchain, in partnership with structured products platform ResonanceX and Nivaura, a fintech offering modular digital platform solutions for end-to-end automation for issuance and administration of debt, equity and structured notes.