SRP Digest: Going down a storm

The SRP Americas 2024 event dominated coverage last week.

On 11 September, the SRP Americas 2024 Conference took place in New Orleans.

Despite hurricane Francine’s best efforts, the event went down a storm, with keynote speaker Randolph Cohen (pictured below), senior lecturer of entrepreneurial management at Harvard Business School, kicking off proceedings.

SRP’s own Petar Dimitrov provided an overview of the Americas market before giving way to the first panel of the day which encapsulated the concerns in the market around expected rate cuts and the upcoming elections.

Trends and strategies within the indexing world were also discussed at length, with thematics and the concept of finding a pure play, among the main topics of debate.

The interesting thing about thematics is that they span different sectors, said Morningstar’s Neil McAllister; while Christopher Loudon of Raymond James admitted that for him, thematics is more about his audience.

“I am dealing with an audience of about 8,000 advisors, all of whom have their own very different opinions, which makes it hard for us to push thematics into the network,” Loudon said.

Designing indexes annuities with the idea of principal protection has been one of the biggest drivers for the growth of the FIA and Rila markets, said Tom Haines, executive vice president, capital markets and index solutions at Annexus.

“I think there's been a real realisation of the legitimacy of providing alternative portfolio performance with downside protection but guaranteed lifetime income,” Haines said on stage in the panel moderated by Max Guimond, head of North American Solutions at Schroders.

During the evening, the best in class in the structured products industry gathered for the SRP Americas 2024 Awards.

The winners included J.P. Morgan, which won Best House, Americas, among others, and Goldman Sachs (Best Hedge Provider), while Adam Siegler, head of Private Investor Products Group for Americas, and head of third-party wealth business Americas, at Goldman Sachs in New York and Natasha Dadlani, managing director, head of EQD and QIS Sales, global markets Americas at Société Générale were voted Personality of the Year (POY) and POY annuities, respectively.

Over in Germany, some 13,040 structured products (excluding flow and leverage) were publicly offered during the first half of 2024, an increase of 9.2% compared to the prior year semester when 11,950 products were available to German retail investors.

The big three German manufacturers – LBBW, Deka Bank, and DZ Bank – issued a combined 4,512 products, and with the addition of Deutsche Bank, Helaba and NordLB, who were also active during the period, they were responsible for 36% of the total issuance in H1 2024 – an increase of five percentage points year-on-year (YoY).

In Belgium, structured products providers are on the offensive to reclaim money they lost to a government bond one year ago.

On 4 September, a 3.30% Belgian government bond which raised €21.9 billion and seriously impacted sales of structured products in Q3 2023, matured.

In recent weeks, several Belgian banks, including Belfius, BNP Paribas Fortis, Deutsche Bank Belgium, and ING Belgium, launched a flurry of structured products – often with higher annual coupons than the new 2.75% one-year government bond that went live today (16 September) – including some that have already raised significant volumes.

Finally, in China, retail investors’ average monthly structured deposit balance dropped 20% YoY during the six months ending 30 June.

The lower interest rate environment has driven many of the structured deposit investors away as they see their annualised returns from these products shrink, according to a senior derivatives trader at a Chinese bank.

“Many retail investors no longer find parking their money into structured deposits attractive – they can use the money to pay off mortgages or choose to buy wealth management products,” the trader told SRP.

SRP’s Nikolay Nikolov delivered a follow up of his analysis on barrier autocalls and their ability to absorb stock market declines. In the second part of his study, Nikolay reviews call levels, step-down features and the performance of structured products linked market cap indices and decrement indices, among other things.

More analysis came from FVC’s Tim Mortimer who explored the concept of Greeks and the role they play in structured products and derivatives.

“The most fundamental Greeks are Delta and Gamma because these quantities are both directly connected to movements in the underlying asset,” said Mortimer, adding that one of the most important Greeks is the sensitivity to volatility (Vega).