Congratulations to 2022’s SRP Europe Personality of the Year Alessandro Ricci, the head investment solutions and member of the executive committee at Leonteq.
Alessandro Ricci joined Leonteq as deputy head investment solutions in 2020 from Exane where he was co-head of derivatives & head of structured products alongside Mathieu Bernard, since 2017.
Ricci (pictured) joined the French cross-asset research and investment house partly owned by BNP Paribas in London as head of structured products. Prior to joining Exane, Ricci had a six-month stint as head of sales for Europe at Leonteq in London.
You could argue that I got involved in structured products by word of mouth - Alessandro Ricci
Before joining Leonteq, Ricci spent eight years at Nomura where he was head of structured equity solutions and fund derivatives sales for Emea until March 2016, when the Japanese bank announced its exit from equity derivatives in the region.
Ricci joined Nomura in 2008 as head of derivatives sales for Southern Europe following the bank's acquisition of Lehman Brothers' European business.
“You could argue that I got involved in structured products by word of mouth,” said Ricci. “Before going for my MBA, in 2002, an old friend from my days at the Engineering School in Naples told me to look into derivatives as he thought I might like it.”
Ricci’s MBA focused on developing his consulting career, but then instead of going into consulting he did an internship at Lehman Brothers in 2003 in London.
“In the summer of 2003 I did my summer internship at Lehman in derivatives. My manager at the time convinced me to join and become a financial engineer, to use his own words. Eventually I got an offer to join the bank. That's how it all started,” he said.
By the summer of 2008, Ricci was co-heading the US bank’s Italian sales equity derivatives desk which covered the whole spectrum of derivatives – flow, retail and institutional.
“I had the privilege of being exposed to a very dynamic environment with many talents, as in those years Lehman was a driving force in derivatives. I specialised into structured products because it suited well my background, both academically and professionally,” Ricci told SRP.
Lehman collapse
The fall of Lehman was a market catastrophe which reverberated across the financial industry, including the structured products market.
“It was certainly an extremely difficult time for the whole industry but also one full of lessons learnt. A key takeaway for me was one about decision making: humans generally fail to grasp asymmetries in outcomes. This bias, coupled with overconfidence (what happens if I am wrong?), can possibly lead to painful outcomes,” he said.
Ricci believes the Covid pandemic of March 2020 was another defining period for the market and the industry.
“The Covid crisis showed everybody how quickly things can deteriorate (and rebound),” he said. “The speed of the market crash and recovery was literally unprecedented, the GFC of 2008 took a year to unfold, in March 2020 it all happened in two to three weeks. I might say that it has alerted the whole industry to the shortened length of market cycles.”
Ricci notes the ability of the industry to adapt is at the very core of the evolutionary principle of the structured products market.
“The industry has evolved tremendously and will continue to do so, investors and providers that survive hopefully understand the mistakes they have made and try not to perpetuate them,” he said. “Ultimately, the industry players that navigate this kind of market dislocation come out stronger as they learn things about risk management, client interactions and product offering, and they can adapt the business to make it more resilient.”
According to Ricci, humans don’t have a good track record at making predictions, hence the need to have very sound governance to control risks, above all unexpected ones.
“The industry has gone a long way in terms of mindset around trust and reputational risk. We as a business exist only insofar as we can provide a competitive service to our clients,” he said. “It logically follows that clients’ interests must come first and should be protected and preserved.”
The good, the bad, the ugly
Ricci says innovation is the specific good of the industry: innovation in payoff, themes and wrappers.
“Structured products are, for me, synonym of continuous evolution and that’s what makes them very interesting,” said Ricci. “Cyclicality is a challenging feature of the whole market, maybe a “bad” one if you want. There are lots of ‘stop and gos’ both among investors and service providers, which in turn lead to cycles of over and under investments.”
Ricci is not sure he can easily point out an ugly feature for structured products specifically. But for the whole financial industry, he notes that any behaviour that creates loss of trust among investors or among counterparts can create permanent damage.
According to Ricci, structured products have evolved massively in the last 20 years and they are widely accepted as an asset class on its own. And that is despite rates going up, inflation, volatility.
“My personal view is that rates might be going up nominally, but I would expect real rates to stay low or even negative,” said Ricci. “That is probably the biggest tailwind for the industry as a whole, not just for traditional yield enhancing products but also for risk optimised exposures to non-traditional asset classes.”
Ricci sees scope for the industry to continue growing and expanding, coupling innovation with education.
“A few years ago, it might have been hard to predict the growth of crypto assets. Thanks to the ingenuity and foresight of some key team members, Leonteq has become a pioneer in the field and developed the largest crypto offering in securitised format,” said Ricci.
From a trend perspective, Ricci wants to position Leonteq at the forefront of the developments in the crypto space. Leonteq offering covers already more than 90% of the market cap of crypto assets, via delta one and volatility products but the firm continues to expand its offer of new services to its clients, such as accessing cryptos via AMCs.
On the other hand, Ricci believes that investment decisions are not sustainable without appropriate knowledge and therefore there is a natural demand for education on structured products.
“Together with international management school IMD, we have developed a high-quality online course on structured products, accessible to all our clients and partners and full of practical examples,” he said. “That's another element that is consistent with our mission: to democratise access to investment solutions, using technology, such as LynQs, bespoke client service and education.”
Looking at the short term, Ricci’s sees Leonteq as an established counterparty with the ambition to expand geographically in the Middle East and continue to pursue its efforts in Asia, where the firm has recruited recently a number of senior executives to drive the growth of the platform.
“We are making very good progress in Asia, a continued area of ambition and focus for us,” concluded Ricci. “In 2021 we have also opened an office in Dubai as a testament to our desire to establish closer proximity to Clients in the region and leverage our investments into a Sharia eligible offering, which will become operational in the next few weeks.”