Actinver has broken the mould in Mexico's conservative structured products market during the past 12 months. Most banks pandered to the Mexico's fixed-income culture and churned out all manner of FX and interest-linked products, but Actinver has forged its own path and developed and distributed an outstanding range of equity and commodity structures designed to meet the emerging demand not only for local but international equities.
"There is a very strong FX culture in Mexico, given what has happened in the past," says Santiago de Velasco, head of derivatives investor relations at Actinver in Mexico City. "Everyone knows where the exchange rate is and where it is going but there is now an emerging demand for equities due to strong performance over the past few years. The demand stretches from local underlyings to international themes such as emerging markets and the US and European benchmarks."
Actinver captured an estimated 20-25% share of the structured notes market in Mexico in 2007, launching 24 notes with overall notional issuances totalling 2.1 billion Mexican pesos (US$200 million). What makes the scale of its offerings and sizeable market share noteworthy is that it efficiently distributes products to a broad range of clients including high-net-worth individuals and private banks through a network of 50 branches, far fewer than most banks in Mexico, whose distribution branches sometimes number in the thousands. In addition, although it has an offshore business arm - unlike most of its competitors - the bulk of Actinver's structured notes are done offshore and in Mexican pesos. Structured notes can only be distributed to qualified investors, which in Mexico means investors who have 1.5 million units of inflation (at the time of writing, this translates into just under 6 million Mexican pesos).
Actinver has displayed striking innovation in equity products over the past year, its most prominent launch being the dispersion note series, the first notes of this type to be listed on a Latin American exchange. The second note in the series, the Global Volatility Note #2, is an 18-month, 100% principal-protected investment designed to pay a return linked to the volatility of an equally weighted basket of 10 international indexes: the S&P 500, Nikkei 225, DJ EuroStoxx 50, FTSE 100, Swiss Market, Hang Seng, Hang Seng China Enterprise, CECE Traded, MSCI Taiwan and Kospi 200. Every six months, the percentage difference (positive or negative) of each market is calculated compared to the basket. At maturity, the note will pay either 100% of the capital or 630% of the highest average difference. For example, if the highest average difference is 24%, the note will pay 7,560 Mexican pesos for every 5,000 Mexican pesos invested.
"We raised almost US$50 million on the dispersion series," says Velasco. "They are non-directional notes where a bet is taken on emerging markets performing better than developed markets, and the note would pay a certain percentage of that dispersion. The first in the series of four was a phenomenal success and rallied 40% in the first five months, while the second note paid 9% in five weeks."
The note, often done as a common hedge fund strategy, was structured with Societe Generale (SG), which Actinver regularly use as a counterparty. Most of the products traded with SG are listed on the Mexican Stock Exchange, Bolsa Mexicana de Valores. Products listed must be capital-guaranteed and denominated in Mexican pesos. Other counterparties include JP Morgan, BNP Paribas, Goldman Sachs, and Barclays Capital.
Apart from offering equity products, Actinver has also brought commodities to the Mexican investor. The distributor has traded a commodity-linked product called the Nota PetroGrano. The 100% capital-protected two-year product provides participation in the upward price move of commodities comprising crude oil, wheat, corn and soybeans. In the event of the underlying portfolio delivering a return of between nil and 20%, the note will pay a return of 20%. In the event of the portfolio delivering a greater return than 20%, the note will deliver the performance. The minimum trade size is 10,000 pesos for one share.
One of Actinver's most ardent strengths is its focus on secondary market trading. Of the US$200 million notional traded over last year, over US$150 million was traded on the secondary market. Due to the complicated nature of secondary market trading factors, Actinver conducts many educational roadshows and ensures that investors understand how the notes are valued and traded. "We are extremely aggressive on the secondary market," says Velasco. "We trade a good deal of the notes because they pay perform well very quickly, but we ensure investors understand how the products are priced and have put a great deal of effort into educating our clients."
The week on Risk.net, December 9–15 2017Receive this by email