Best in Benelux - KBC Asset Management

Structured Products European Awards 2006

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Last year, we honoured KBC Asset Management (KBCAM) with our house of the year, interest rates award. KBCAM's quantitative and structuring expertise is second to none, and the Brussels-based outfit has always punched above its weight when it comes to innovation. This year, however, it seemed obvious to us that KBCAM should be the recipient of this distributor category; after all, KBCAM commands more than a 50% share of the Belgian structured products market, according to various estimates.

Structured products account for more than half of the asset manager's retail investment product range. On a monthly basis, KBCAM will launch around 25 structured for the KBC Group Network (between 15 and 20 issues in Belgium, and the rest offered in Central and Eastern Europe and Asia). Impressively, so far this year KBCAM has launched 187 structured products and collected volumes of EUR5,091 million. "Delivering this number of products - even with these huge volumes - is done efficiently by dedicated teams in KBCAM working solely on structured product launches, encompassing product development, legal support, fund management, risk control, product management and the all important market knowledge," says Brussels-based chief executive Stefan Duchateau. "Currently, we manage more than EUR35 billion in structured products and I would estimate we control approximately 54% of the retail structured products market in Belgium."

Even with regard to the wider investment products market in Belgium, KBCAM triumphs. "We have established ourself as the dominant player in all investment product categories, and have a market share of around 34%, according to the Belgian Asset Managers Association," Duchateau adds.

KBCAM is in the fortunate position of being able to structure all of its own products, which are then distributed throughout the KBC Group networks in Belgium (KBC Bank, CBC, Centea and KBC Insurance).

Innovation

Belgian investors typically demand plain vanilla, capital-protected structured products and have a strong preference for equity underlyings. But in keeping with its commitment to serving client needs, KBCAM has successfully launched a number of products that display innovation at every turn.

The KBC Equisafe World Sustainables series, for example, has garnered more than EUR182 million in three tranches so far. The products have a five-year duration and are based on a diversified basket of 30 global shares that meet criteria relating to sustainable business practices such as arms policy, human rights, and corporate governance, social and economic policy, allowing for participation in the positive performance of the basket.

Meanwhile, KBCAM has been at the forefront of providing Belgian investors with shorter-term products. The KBC EquiPlus Reverse Spread has sold EUR846 million in two tranches, based on a basket of 20 shares with worldwide diversification. There is 100% capital protection with a duration of just 18 months. "The extra payoff at maturity is determined according to a 'Reverse Spread Formula'," Duchateau explains. "At the start of the product a premium of 48% is fixed for the client. At maturity the client is paid this 48% decrease by the difference in average performance of the five best-performing shares on the one hand and the five worst-performing shares on the other hand. Let's assume that the average performance of the five best-performing shares is +20% and the average performance of the five worst-performing shares is -20%, then the ultimate payoff on top of the capital invested equals 48% - (20% - (-20%)) = 8%."

KBCAM also enjoys success outside the Belgian retail arena. It structures and distributes products in Central and Eastern Europe through K&H Hungary, Kredyt Bank Poland, CSOB Czech Republic and Slovakia and NLB Slovenia. KBCAM is also active in China, Hong Kong, and Taiwan.

WHY KBC ASSET MANAGEMENT WON

KBCAM is a structuring powerhouse, but its structured products distribution capabilities are just as impressive. The outfit is in a league of its own in Belgium and constantly responds to investor needs.

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