As well as income and structured funds, Barclays Capital has taken advantage of a natural regional interest in foreign exchange with its Intelligent Carry Index (ICI), as investors look for new assets with low correlation to equities and bonds. "This year we have introduced the forex income strategy, which applies a mean variance efficient frontier to forex," says Yongsheng Tan, BarCap's director for Asia-Pacific Solutions Sales.
For commodities, the bank was the first to introduce collateralised commodity obligations (CCOs) in 2005. "It is definitely something we feel we will continue to push over time," says Tan. In Australia, the bank has structured tax-efficient payouts linked to equities and commodities natural and unique to the country.
"Most significant is our leap in market share in flow exotics in equities," says Peter Hu, BarCap's head of investor solutions for non-Japan Asia. "We were a tiny fraction of this business early this year. We were fortunate being late. It meant that we could build a straight-through processing system that could deal with the volume."
"BarCap has the best investor solutions package, as it can provide a very comprehensive range of underlyings such as equity, forex, commodities, interest-rate and hybrid solutions," says a Singapore-based distributor. "Its pricing is competitive and very flexible. For products, BarCap produced the Triple Fortune Fund - Asia's first capital-protected forex fund."
"It has the most creative and interesting products," says Weiyi Mei, senior investment manager in asset management at Haitong Securities in Shanghai. "It has the best variety of structured products and services."
The bank has continued to improve an equities business that it restarted in 2004, since which time the business has increased in volume by 235%, says Susan Chan, managing director of equity derivatives structuring at BarCap. "We have put a footprint in new markets - and we are the champions of structured rules-based algorithms packaged as funds into retail, structured as notes in private placements via principal protection or delta 1," says Chan. "In Singapore we consume that space, with more than 50% of the market."
BarCap is now selling kinetics in Germany, the UK, Scandinavia and Holland. "It is clearly something that was created in Asia, but we have managed to export it to as many countries as possible," says Chan. "We have revolutionised rule-based algorithms, or the structured asset space," says Chan. "Our first strategy - alpha kinetic - has been our blockbuster: it is a simple buy-write strategy where the buy-write is a 90% put with a call with a minimum strike of 102%."
Towards the end of 2006, the bank decided to make it into public funds. "We issued our first into Singapore - the Asian Real Estate Income Fund - based on this kinetic strategy," says Chan. "We have issued 11 funds in Singapore and two in Hong Kong, and have raised over $2 billion in assets under management in 16 months."
With one counterparty in Singapore, BarCap has raised US$100 million a month under privately placed structured notes, using CPPI wrappers, or just as delta 1. "In terms of CPPI technology, BarCap is tops with its kinetic structure," says another Singapore-based distributor. "It has a lot of good idea generation and provides multi-solutions - it has just come up with GBU, a global currency unit that offers 0% funding. The bank also has innovative ideas in the areas of credit curves, with a long-short strategy on the CDX index, and was first to introduce CPPI on a dynamic basket."
For volatility the bank has relied on its Voltaire Index, which has worked well in the private banking and hedge fund space, says Chan. BarCap's successes with ABN Amro and Bank of East Asia private banks was added to that it had with AIG, particularly with the Voltaire trade. "Barclays has enormous success in initiating investment product solutions in the past couple of years. We are glad to partner with them, leveraging their excellence," says Ringo Lau, head of treasury, trading and investment at AIG Private Bank.
BarCap's Ramp strategy offers delta 1 access to a market and leverage on the upside up to two times. "With this, we launched the China Accelerator Growth Strategy on July 4 in Hong Kong, linked to the Hang Seng China Enterprises Index." The timing was perfect because of the desire to get access to China - it is now running at US$550 million assets under management. "Sometimes better lucky than smart," says Chan.
BarCap has been the top provider this year for Citi in Singapore. "This has been a big success, as they are one of the toughest accounts to win over," says Chan. In Hong Kong, adding Hang Seng Bank as a distributor earlier this year was another big win, says Chan.
Further progress has come in Japan. "We started our initiative in Japan in February via onshore trading and structuring, with the main focus to service the onshore business," says Chan. "Globally, about 30% of our portfolio on the equity side is hybrid, linking commodities or forex to equities."
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