InspereX has won the Best Independent Broker-Dealer, USA accolade for the fifth consecutive year at the SRP Americas Awards 2023, presented in Chicago on 27 September.
The year 2022 can best be described as a “gotcha” market with interest rates increasing almost fourfold, making dramatic moves that many have not seen.
We limped into 2023 with a slow December, and advisors were flocking to treasuries in the first six months [...] but since June, advisor interest has been back at all time high levels, which has kept our team occupied with education - Deryk Rhodes
At the same time, the opportunities that emerged have enabled underwriter and third-party distributor InspereX to deliver its “best year” revenue-wise, alongside a record high sales volume of US$11.5 billion from market-linked products (MLPs).
Across more than 40 issuing shelves, the MLPs were distributed to over 300 accounts, with individual Cusips, a code that uniquely identifies a North American financial security, ranging from US$100,000 to US$400m.
By product type, rate-linked notes accounted for approximately US$8 billion while the remaining were equity-linked notes and market-linked certificates of deposits (CDs).
Year-on-year (YoY), the principal protected notes (PPNs) and market-linked CDs climbed 317% and 150%, respectively.
As a third-party liquidity provider, InspereX had approximately US$500m in the secondary market as at the end of 2022.
“We limped into 2023 with a slow December, and advisors were flocking to treasuries in the first six months,” said Deryk Rhodes (pictured), head of MLP trading & origination at InspereX. “But since June, advisor interest has been back at all time high levels, which has kept our team occupied with education.”
In 2023, the sales volume on the equity side is expected to remain flat compared to 2022 as the US firm expects a 10% to 15% decrease for market-linked CDs and a 10% to 12% increase for equity-linked notes.
Meanwhile, rate-linked notes are predicted to edge down by one-third to US$5.5 billion in 2023 YoY.
Rhodes noted that the average tenor of the rate-linked notes issued this year has extended from three years or less commonly seen in 2022, as the yield curve approaches a normal shape, bringing more profitable trades.
“We’ve started to see more five, seven or even 15-year structures,” he explained.
Additionally, InspereX remains the largest third-party distributor at a safe lead when it comes to rate-linked notes in the US, according to Rhodes.
In terms of market-linked CDs, the sales volume is expected to see a slight decrease by year-end compared with 2022, primarily due to the demand shift towards PPNs, following a near triple growth from 2020.
“Earlier this year, we saw bullish sentiment with investors foregoing some protection for upside, but protection levels have become prominent again as markets have been pulling back,” said Rhodes, adding that 2023 is likely to see the highest volume of PPNs at InspereX.
“With the presidential campaign coming up and geographical events unfolding, the uncertainty will bode well for solutions that give clients that confidence to stay invested and participate in the market with protection on the downside,” said Rhodes.
Business growth
Headquartered in Florida, InspereX is the result of a merger between broker-dealer Incapital and 280 CapMarkets, which was completed in June 2021.
The firm customises risk management investment solutions through wholesale to over 30,000 financial advisors at banks and independent broker-dealers and direct sales to roughly 300 active account partners, including large brokerage firms known as wirehouses, broker-dealers and registered investment advisors (RIAs).
“The number of advisors we work with has jumped quite a bit each month this year,” said Rhodes.
In the US, a growing number of accounts are looking for a holistic platform “that does their education and sales, puts their calendar together, trains their sales force and helps them know what structures to be focusing on, versus just having a wholesaler hawking a product”.
He added that the education provided by the team of over 60, who have a sole focus on MLPs, is a key growth driver at Insperex.
Throughout 2022, the team reached to advisors providing trade ideas with 20,000 in-person meetings and 178,000 calls. There are also Finra-reviewed, issuer-agnostic educational materials available for individual investors.
The distributor monitors its penetration level by referring to the number of new representatives, the tickets dropped by representatives and the number of times for the accounts and more.
“We would also like to see additional growth in new mandates, and are looking to grow at a slightly faster pace next year,” said Rhodes.