This week, we look at the development across three continents, featuring three exclusive quarterly market reviews.
SRP caught up with Bank of America (BofA) which currently has 14 indices referenced with nearly US$24 billion in assets in the US annuities market. The bank celebrates its 10th year anniversary in the market as an index and hedge provider.
“As carriers refresh their index line ups, we have seen demand for indices with higher expected allocations to equities and either minimal exposure to bonds, or sophisticated duration management overlays,” said Gabriel Lettieri, managing director, head of Americas insurance solutions at BofA, in an interview with SRP.
On the SEC-registered structured note side, single stocks have become the preferred underlying type for Citigroup’s issuance in its home market in the first quarter of the year, according to SRP data.
The US bank traded US$3.5 billion notional from 1,133 issuance, down 4.1% year-over-year (YoY), following J.P. Morgan at a distance in the second place.
Citigroup's net income during the first three months of 2024 decreased by 26.1% to US$3.4 billion although revenues remained largely flat at US$21.1 billion. In the meantime, diluted earnings per share (EPS) was US$1.58, down from US$2.19.
In the fund segment, an inaugural report by the US SEC revealed that structured notes account for less than one percent as investment for mutual funds, exchange-traded funds (ETFs) and closed-end funds as a whole. By aggregate gross value, structured notes have experienced an overall stable level at US$20 billion as of September 2023 since a surge in June 2020.
In the neighbouring market, structured notes have fared well by issuance in the first quarter of the year with Canadian Imperial Bank of Commerce (CIBC) taking over BMO Capital Markets as the most active issuer, according to SRP's Canada Market Review for Q1 2024.
Also in Canada, the issuance at CIBC surged 50% to 528 structured notes comprising 459 non-principal-protected notes (NPPNs) and 69 principal-protected notes (PPNs) year-over-year.
Meanwhile, the Chinese market started to feel the pressure of the regulatory investigation over snowball structured products, which had been flying off the shelves until the onshore equity market started to edge lower from the second half of last year with the CSI 500 hitting a five-year low on 5 February.
The China Securities Regulatory Commission (CSRC) has issued new internal guidance on risk management for A shares-linked OTC derivative contracts to local securities houses in an attempt to tighten new exposure to these products.
Meanwhile, a group of asset managers showed optimism on structured wealth management products in China, but with a caveat that a wider retail adoption remains a challenge at the SRP 2024 China Conference last Wednesday (17 April).
The country has grown to the second-largest market for wealth management in the world and that brings the importance of customisation to meet different investors’ needs, said Jiang Wu, managing director of the investment management department at China Merchants Wealth Asset Management.
In Taiwan, structured note issuance soared 119% YoY in the first quarter of 2024 as investors maintained a strong appetite for equity-linked products.
Also in Asia Pacific, the technology sector has led the underlying exposure of equity-linked structured products in the region in 2023, according to our latest Spotlight Apac analysis.
Specifically, the tech sector made up 42% of the market share of single stock-linked products sales for the year. The most popular stock picks included Samsung Electronics, Nvidia and AMD, which were widely used in Taiwan’s structured notes and South Korea’s equity-linked bonds (ELBs).
In Europe, the past week saw the introduction of a new series of capital guaranteed products from ING Bank, which targets retail investors in the Netherlands, after tripling its sales volumes of structured notes in 2023 compared to the prior year, driven by private placements.
The issuer also issued some large public offers in the Netherlands, Belgium and Germany - mostly vanilla interest rate-linked notes, according to Zico Yeh, head of client solutions group (CSG) investment solutions for Emea at ING Financial Markets.
Across the border, some €970m (US$1 billion) was collected from 18 publicly offered structured products in Belgium from January to March, 80% of which came from interest rate-linked products, according to the Belgium Market Review, Q1 2024.
The volume decreased 20% quarter-over-quarter or was down 45% YoY after a quarterly peak seen in the first quarter of 2015.
As part of our Europe awards coverage, UBS shed light on the combined capabilities resulting from the synergies between its in-house sell and buy sides, following the integration of the Credit Suisse structured products business.
SRP considered over 73K structured products issued by UBS between 1 October 2022 and 30 September 2023 worth an estimated US$15 billion as well as 60K products that matured worth an estimated US$7.9 billion during the period either early or organically.
On the regulatory side, the European Banking Authority (EBA) has launched a public consultation on its draft Regulatory Technical Standards (RTS) on the method for identifying the main risk driver and determining whether a transaction represents a long or a short position.
Last but not least, our SRPInsight: Europe Special Issue has been released for free download.
Image: Chokniti/Adobe Stock.
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