Products offering 100% capital protection saw their market share decrease by 11% in 2021, not helped by the continuously low interest rates.
Some 137 structured products worth a combined €1.4 billion were sold to Belgian retail investors in 2021.
Sales volumes were down 55% compared to the previous year (FY2020: €3.3 billion from 212 products) and a far cry from the dizzy heights of 2005 – the year the SRP Belgium database was launched – when €23 billion was collected from 493 products.
In this article, the focus is on levels of capital guarantee, and in that sense the Belgian market is somewhat unique in Europe, as investors have traditionally preferred full or partially capital protected products, much more so than in Germany, Switzerland or even the Netherlands.
However, the extreme low interest rates have made it increasingly difficult to structure interesting products in euros that not only offer some form of capital protection, but also an attractive upside. This has led to a number of providers, including AG Insurance, BNP Paribas Fortis, ING Bank and KBC to (temporarily) leave the market, which explains why issuance was at its lowest ever level in 2021.
Partially capital protected products (equal to 90%, and below 100%) were the most popular in 2021, achieving a 46.4% share of the market (2020: 42.9%).
Sixty-one products – mainly linked to equities and with an average tenor of 7.5-years – were issued in this category during the year. Of these, 52 products worth a combined €470m (an average of €9m per product), protected 90% of the nominal invested while nine structures (€202m, an average of €22.5m per product) had a protection level of 95%.
The former included 25 products that were distributed via Deutsche Bank’s network while the products with minimum 95% capital protection were issued via Belfius (five) and KBC (four).
The 53 products that offered 100% capital protection held a 38.1% share of the market, much lower than the previous year (2020: 49.1%). Their average maturity was 9.65-years and they accumulated sales of €550m (an average of €10.4m per product). The products were distributed, among others, via Belfius (15 products), Bpost Bank (13), Deutsche Bank (11), and BNP Paribas Fortis (10).
Twenty-three products from this category were linked to the interest rate (€330m), with a further 23 products (€185m) tied to a single equity index.
Belfius was the sole provider offering products that put full capital at risk. There were 18 in total (€190m) and the average term was 6.75-years.
The products were split between products from the bank’s ‘Opti performer’ series and private notes that qualify under the opt-out regime, which allows distributors not to apply the FSMA’s moratorium to investors holding at least €500,000 in deposits and financial instruments at their institution.
Four products had a capital return of more than 100%. They were marketed via Crelan and captured two percent of the market in 2021. The average maturity was 8.2-years, and they were denominated in Norwegian kroner (two products), Australian dollars, and US dollars (one each), respectively.