Latest: Citi enters Simon consortium as new investor

Citi has made an undisclosed strategic investment on Simon Markets, the US multi-issuer structured products fintech company owned by a consortium of seven financial institutions, including Goldman Sachs, Barclays, Credit Suisse, HSBC, J.P. Morgan, Prudential and Wells Fargo.

Citi is already plugged into the Simon platform as an issuer of structured investments and through its wealth management division whose financial professionals use the investment platform.

Financial professionals today are looking to stay ahead of market volatility and manage client portfolios with confidence - Fabrice Hugon, Citi

The bank said in a statement that in ‘strategic alignment with the focus of both companies’ the investment underscores its commitment ‘to cutting-edge technologies’ that can deliver advisor-facing tools for risk-managed solutions and ‘is complementary to broader partnership opportunities that exist between the two firms’.

‘Financial professionals today are looking to stay ahead of market volatility and manage client portfolios with confidence,’ said Fabrice Hugon (pictured), head of Americas sales for solutions for financial intermediaries at Citi, who has joined the platform’s board of directors.

The US platform closed the first leg of a strategic financing round of up to US$100m of growth capital in July 2021 - the Series B round was led by WestCap, a growth equity firm founded by Laurence Tosi, former CFO of Airbnb and Blackstone, with existing investors also participating in the round.

Simon reported a year-over-year increase in volume of 94% and usage of 67%, last week. The platform also closed several strategic partnerships in 2021 to expand its product offering for financial professionals and released several enhancements to its portfolio allocation tool Simon Spectrum to improve the way advisors manage client accounts.

According to SRP data, there are 6,623 products listed on the Simon Platform with a value of US$18.5 billion. Goldman Sachs with US$10 billion is the most active issuer on Simon followed by J.P. Morgan, TD Securities and Morgan Stanley.

Russia’s watchdog points at lack of suitability controls in sales to older investors

Many complex structured financial products are sold to older people in Russia, the first deputy chairman of the Bank of Russia Vladimir Chistyukhin said at the Kommersant conference Financial Market 2022. New Goals in New Realities, earlier this week.

According to Russian media reports, Chistyukhin noted that the regulator is concerned about the rise in the sale of structured products with five-year terms that ‘cannot be stopped any earlier’ and that a significant proportion of these sales are targeted at citizens over 60 or even 70 years old.

‘We can assume that this is the belief of individual professional participants in the longevity of investors and in the fact that adults understand what products they are purchasing, but, of course, this situation is starting to seriously worry us,’ Chistyukhin said.

Chistyukhin also noted that the regulator is monitoring the market of insurance products, the offer of investment life insurance and endowment life insurance for the elderly.

The Central Bank will issue new guidance that will restrict insurance companies from selling low-quality products and allow insurance companies to focus on long-term life insurance, and will extend the rule on the qualification of investors to participants in the insurance market and prohibit unqualified players from acquiring investment and endowment life insurance policies.

UK products deliver in 2021, beware of five-year term comeback

In 2021 the market uplift, particularly in the second half of the year, meant that a significant number of autocall products matured in the UK market with a higher gain that they would have realised the previous year, according to the Lowes Financial Management’s Annual Performance Review 2022.

In 2020 the pandemic market correction impacted autocalls as the lower market position meant that many potential maturities were deferred until later observations. However, in 2021, the 529 plans matured returned an average annualised return of 6.2% over an average term of 3.4 years which represents an increase of 2.68% from 2020.

The latter half of 2021 witnessed a sharp increase in the issuance of autocall plans with shorter maximum investment terms, particularly those with five-year terms.

'It is our view that this re-introduction of five-year maximum duration autocalls is an unwelcome shift, at odds with the best interests of the sector and investors and we will continue to comment on it undesirably,’ said Ian Lowes (right), MD at LFM.

According to the report, 529 plans matured in 2021, representing a 125% increase from 2020 while 91.30% of all products maturing in 2021 generated positive returns for investors, with 7.56% returning capital only and 1.13% returning a loss.

The six maturing plans that realised a capital loss were share linked plans; while the 459 maturing capital-at-risk plans collectively produced an annualised return of 6.82% over an average duration of 3.19 years.

Autocall products made up 75.61% of all maturing products in 2021, returning an average annualised return of 7.03% across an average 2.91 years.

From an underlying perspective, the FTSE 100 Index in isolation continued to be the most prevalent underlying in the UK, accounting for 62% of all maturities.

Almost 60% of capital-at-risk maturities were linked solely to the FTSE 100 Index and these produced an average annualised return of 7.01% over an average duration of 2.88 years. IN 2021, there were also 70 deposit plans matured in 2021, 55 of which were linked solely to the FTSE 100 Index - the 70 collectively produced an average annualised return of 2.13% over an average duration of 4.69 years.

UK pension fund chooses Solactive for ESG passive portfolio

East Sussex Pension Fund has partnered with sustainable investment manager Osmosis to launch a £200m global equity ex-fossil fuels portfolio linked to the Solactive Osmosis Resource Efficient Core Equity Ex-Fossil Fuels Index.

The index aims to track the performance of large-mid cap global developed market securities operating in accordance with certain market standards on ESG controversy screens - it excludes companies that generate more than five percent of their revenue from fossil fuels or from nuclear power; companies that produce nuclear weapons, controversial weapons or civilian firearms are also excluded, as well as tobacco companies and those that breach the UN Global Compact Principles.

At the same time, the index targets companies that are efficient in their productive use of resources, delivering reduced carbon emissions, water consumption and waste generation, relative to economic output.

‘This dual approach seeks to protect investors from potential value destruction, as regulatory and financial pressures on the fossil fuel industry intensify, while also limiting the economic impact of potential energy price reflation in a post-Covid recovery,’ said Timo Pfeiffer, chief markets officer at Solactive.

This approach is part of East Sussex’s ongoing commitment to address the investment challenges presented to their passive holdings by the energy transition. The equity strategy will be advised by Osmosis Investment Management with UBS Asset Management acting as investment manager, under the current Passive Service Agreement, as set out by the UK National LGPS (Local Government Pension Scheme) Frameworks Team.

CAIS adds partner in platform expansion push

US fintech platform CAIS has announced a new partnership with Focus Financial Partners to launch a new alternative investment platform to deliver access to a range of alternative investments, adviser education, independent due diligence, and end-to-end digitised transaction processing as well as third-party reporting integrations.

The CAIS platform will enable Focus partner firms to evaluate a range of alternative investment strategies on behalf of their clients. This will include hedge funds, private equity, private credit, real estate, digital assets, and structured notes.

CAIS will also seek to launch and operate proprietary feeder funds and multi-manager funds - these customised fund solutions will be exclusively available through the CAIS Platform, while Focus will be able to add their own sourced third-party funds to the platform and benefit from centralised monitoring, transacting and reporting.

CAIS will also provide its educational outlet CAIS IQ to Focus so advisors can further improve client outcomes. CAIS IQ content will also be tailored to meet the needs of each Focus partner firm.