The French distributor of structured products has won the award for Index of the Year at the SRP Europe 2024 Awards.
The award-winning index, the S&P France 40 Paris-Aligned Transition ESG 5% Decrement Index, was created in collaboration with S&P Dow Jones Indices. It tracks the performance of eligible equity securities from the S&P France BMI, selected and weighted to be collectively compatible with a 1.5ºC global warming climate scenario at the index level, less a fixed fee of five percent per year.
Since 2016, we have created many indices for our structured funds activity, but our requirements have evolved since then, as has the ESG data - Mathieu Migault
Federal Finance Gestion, a subsidiary of Crédit Mutuel Arkéa, used the index as the underlying for three of its structured products during 2023, including Autofocus Transition Climat Février 2023, a nine year autocall that sold €172m (US$186m) at inception.
Another Paris-Aligned Benchmark (PAB) index constructed in partnership with S&P, the S&P Core Eurozone 50 Paris-Aligned Transition ESG 5% Decrement Index, was used by the French investment manager in two autocallable products that collected a combined €192m.
“Since 2016, we have created many indices for our structured funds activity, but our requirements have evolved since then, as has the ESG data,” said Mathieu Migault (pictured), fund manager at Federal Finance.
The company developed its range of PAB indices together with S&P to meet its internal ESG criteria and label requirements with specifications: sectorial exclusions, controversies, high level of selectivity, and by using science-based target initiative (SBTi) certification.
The indices, combined with Federal Finance’s new method of structuration – where instead of through a swap, products are structured by physically replicating the index – led to the company becoming the first French provider to obtain the Towards Sustainability ESG label for its notes and structured funds in 2022.
“From the distributor side, being labelled allows our structured funds to be part of the internal ‘Sustainable Finance’ product range, where our bank incentivises advisors to propose for our clients,” said Migault, adding that from the client’s perspective, it strengthens the financial aspects.
“The ESG elements do not negatively impact the conditions you can offer thanks to the structuration,” he said.
2023 was a good year for Federal Finance in terms of flows, performance, and diversity of its products, according to Migault.
“Flows reached €500m […] three funds autocalled and many paid coupons, while we made products with our PAB indices for different Arkéa clients – retail, high-net-worth, employee savings plan, insurers – on different payoffs, such as Athena, digital, and offered maturities between three to nine years,” Migault said.
For Migault, one particular highlight for 2023 was a capital protected structured fund that was launched internally for Arkéa employees in their employee savings plans – the first time the company had done so.
“It was a great success as the employees opted en masse for this product among the range of available funds.
“Like our other structured funds, this one fulfilled the AMF requirement for a central communication on ESG criteria and it got the ‘Towards Sustainability’ label,” Migault said.
This year, Federal Finance plans to launch a structured fund on a new index, which goes further on ESG aspects through respect of the planet (PAB, artificialisation of soil). The index has been developed with Solactive and provides a geographical diversification (transatlantic).
“For 2024, we also expect to launch funds with a new structuration, payoff, or asset class to fulfil the needs of our clients,” Migault concluded.
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