In the second part of an interview, Walter Cegarra chief executive of Q-Hub, a structured investments platform focused on long term savings QIS/AMCs, and leverage finance, part of FNZ, talks about the platform’s track record and recent case studies.

Cegarra points at three key aspects on the FNZ Q-Hub’s structured investment side that make the firm a reliable partner.

“We have a unique ‘real life’ track record of delivering structured products platforms,” he says.

Since 2015, FNZ Q-Hub has delivered and been contracted for nine client platforms, initially in continental Europe and more recently expanding to South Africa, Latin America and Asia – five of those platforms were delivered to insurance companies in Europe.

The last 18 months were the best in our history in terms of new mandates won with our clients

The second differentiator is the operational risk cover the firm offers in all its platforms which is provided by FNZ Group, “a large, established, highly regulated financial institution – not a smaller start-up”.

Cegarra (below right) also highlights the firm’s ability to offer its Q-Hub services either as a standalone, to clients with existing administration and execution systems and processes in place, or as part of a broader platform offering leveraging on other parts of the FNZ Group.

“We have been growing very fast over the last couple of years, both at group level and for FNZ Q-Hub,” he says. “For Q-Hub, the last 18 months were the best in our history in terms of new mandates won with our clients, leading us to have been and continue to be very active with hiring talent for our teams.”

Investment banks

FNZ has also been mandated by an investment bank to build the infrastructure for their whole structured notes business with AMCs at the core.

“They want to be able to offer the typical structured product payoffs such as delta one, protected (including LTS) and leverage products linked to mutual funds and model portfolios,” says Cegarra. “From day one they had a focus on self-select AMC portfolios on the platform: they wanted to offer AMCs either as delta one direct investments or as underlying to structured investments. 

“They were keen to have a fully dedicated and integrated platform combining all the interfaces required for themselves, as manufacturers and hedge providers, but also so that distributors could build products directly for end investors in the platform.”

As with other structured products platforms the infrastructure provided by FNZ will enable the investment bank and the distributors to define each product directly on a fully automated from product creation, to pre-trade simulations, trade capture, issuance, documentation, rebalancing, hedging, valuation, and reporting.

“For each product, the investment bank can define the range of flexibility offered to the distributors and end clients, and the risk and pricing parameters required for them to hedge the products from their balance sheet,” says Cegarra. “The distributors can then build their own client products and client portfolios using the distributor-dedicated version of the platform.”

Some investment banks especially those with an equity derivatives and structured products pedigree have already built their own issuance platforms, but smaller players seeking to automate processes and make the access of distributors more efficient are looking to outsource this to third parties.

“Deciding not to build their infrastructure from scratch internally, but to work with us as their dedicated provider, allowed the investment bank to accelerate significantly their time to market, benefit from a specialist and purpose-built platform, and align their costs to the success of their own business, since our main business model is bps on AUM on the platform,” said Cegarra.

Insurance companies

On the long-term savings side, the firm has been working with an Italian insurance company in Europe since 2018, to deliver the client's first iProtect platform.

“It was our third delivered at the time,” he says. “Their objective was to offer their clients an alternative to cash, given the increasing pressure on cash yields already, in a capital efficient manner, by giving them access to individualised protected unit linked policies.”

According to Cegarra, the insurance company decided to guide the investors through the individualisation by providing access to four model portfolios along different themes and three levels of protection each – “aiming to strike a balance between matching the needs and objectives of individual investors while keeping the messaging simple”.

For this project, the amount and times of contributions and withdrawals were “fully individualised”.

FNZ provided four integrations in one package: to the insurance company for the manufacturing, rebalancing, valuation and management of each individual policy; to the distributor by providing a dedicated white labelled UI integrated into their existing portal used both for pre- and post-sales client engagement by the advisors, but also for business management; to the custodian for the aggregation and execution of the rebalancing across mutual funds; and to the investment bank selected by the insurance company as a hedge provider, for the gap risk monitoring at the individualised policy level and the hedging reconciliation for the benefit of the insurance company.

“That initial transaction was so successful for the end investors during the Covid ‘crash’ last March, and the parties involved, that we are currently working on the third transaction for the same insurance company,” concluded Cegarra.