As the market continues to stabilise, it’s been a decent week for index launches, industry consolidation and issuance levels.
S&P Dow Jones Indices has expanded its ESG index offering by launching the S&P MidCap 400 ESG and S&P SmallCap 600 ESG indices, amid increased demand for sustainable thematics from investors. According to Mona Naqvi, senior director and head of ESG indices for North America at S&P, the new index series helps make ESG more accessible for market participants. It also reduces barriers to entry into the ESG investment space by being a mainstream-like product that offers a similar risk and return to the underlying benchmark.
It's still very much a yield seeking marketplace - Ian Merrill
SG’s recently launched Global Sentiment Index was one of three indices chosen by US annuity provider American Equity to underlie its Asset Shield fixed indexed annuity (FIA). The other two are the exclusive BofA Destinations Index, developed by Bank of America in collaboration with American Equity, and the Credit Suisse Tech Edge Index which combines biotech ETF asset classes with fixed income components.
Ian Merrill, Barclays’ managing director and global head of equities structuring, told SRP that, a challenge that the market is facing is the number of indices on offer for clients.
“Are we making it difficult for clients to choose one over the other? I would say that is something that we should keep an eye on as an industry,” he said. “It's still very much a yield seeking marketplace where you have clients looking for both index and single stock exposure in autocall or callable format as examples…I think the piece that we do also see demand for is in growth structures, the multi-asset strategies, like our Trailblazer Sectors 5 index, in note and annuity insurance format.”
Goldman Sachs has seen the recent departure of two of its most senior executives within the structuring and strats sales unit. Stacy Selig, co-head of global structuring and sales strats and head of Americas structured sales, and Tom Leake, head of equity structuring for Emea, in London, who left the US bank to join Capstone Investment Advisors as head of solutions, hare parting ways with the US bank. Selig was appointed to her current role in early 2019 after Goldman reshuffled its systematic trading strategies team which saw the former co-head of global sales systematic trading strategies (Strats) Stefan Bollinger, shifting to the bank’s private wealth franchise.
After a 17-year partnership, BNP Paribas is looking to acquire up to 100% of Exane, raising its stake from the 50% currently held. The French bank is seeking to ‘further strengthen and widen the range of cash equity and derivatives services’ it offers to institutional investors and corporates globally, and leverage the acquisition of Deutsche Bank’s Global Prime Finance and Electronic Equities business in 2019 to position the bank as a leading provider in global equities.
Exane is a small player in the public offering space and has just over 275 live products worth an estimated US$364m across markets including Italy (254 products/US$292m) and Ireland (16 products/US$53m). There are also four live products issued by Exane on SRP’s institutional database.
When it comes to product issuance, it’s worth watching what is happening in South Korea as the country’s derivatives-linked securities issuance has more than halved compared with 2019. The issuance of derivatives-linked securities (DLS) in South Korea in 2020 has fallen to a five-year low, at KRW7.9 trillion (US$7bn), down 55.1% year-on-year. In the meantime, derivatives-linked bonds reached a five-year peak at KRW14.4 trillion, up 23.1%. Together they represented a decrease of 23.9% YoY as the autocallable payoff was hit hard by the Covid-19 related sell-off and a series of new rules on DLS gradually came into effect, according to data from the Korea Securities Depository.
Conversely, the Hong Kong Stock Exchange (HKEx) has reported a ‘strong year’ for structured products after delivering a record-high number of listings at 50,947 in 2020. The figure was a 32% increase compared with the previous record of 38,472 in 2018, according to the HKEX’s FY20 annual report. In addition, the average daily turnover of callable bull/bear contracts and derivative warrants reached HK$18.6 billion, up three percent from 2019 and accounted for 14% of the total market turnover. However, the newest product type in the exchange, inline warrants, saw the number of listings gradually dropping to 507 as of 2020 year-end, down 45% year-on-year, according to the HKEx data compiled by SRP.