RBS Global Banking & Markets (RBS) has made its mark in 2007 by offering even the smallest retail investors the opportunity to tailor their own products. The bank's most notable offering came in the form of its Quartet and Autopilot products. Quartet offers entry to investments in 24 different permutations of currency and stock markets with guaranteed minimum returns available on request. The quantitative, actively managed Autopilot was RBS's successful attempt to redefine the value of structured products against mutual funds.
Where 12 months ago RBS was only able to offer structured deposits, it now has a comprehensive wrapper platform and brought to market 94 products between September 2006 and September 2007, more than any other UK distributor. The bank's sales are up 70% for the year to date and its mass retail distribution channels, through which the Quartet product is sold, include both RBS and NatWest branches and intermediaries such as building societies, IFAs, life companies and private banks.
The development of its business in the UK coincides with an improving market that is finally showing signs of getting over the 2001 precipice bond debacle, although still has to content itself with playing second fiddle to mutual funds.
The UK market has experienced a tough few years, and the biggest frustration is that structured products are still the poor relation to mutual funds, says Zak de Mariveles, managing director and head of UK sales, Structured Investor Products at RBS. With rising markets, structured products have an increasingly prominent role to play in diversified portfolios and the simplicity of the Quartet product is a viable way for investors to construct a diversified investment tailored to their needs, says de Mariveles.
The Quartet Guaranteed Stockmarket Bond offers investors access to a choice of four global stock markets, three currency options and two return options. It combines a distinctive pick and mix approach. The currencies available are sterling, US dollars and euros. Within each of these, investors can choose from four key markets: UK, Europe, Asia or the World Option.
In addition, deposits can be spread across one or more of these options, with a minimum of 10,000 of either sterling, euros or US dollars in each one. Within each market there are two options for levels of return. The straight participation option offers the potential to receive more of any growth in the underlying market, but this offers no minimum return. The guaranteed minimum return option offers a lower proportion of any growth in the underlying market but comes with the security of a minimum return.
The UK market option is based on the performance of the FTSE 100 Index, while the Europe option is based on the DJ Eurostoxx 50 Index. The Asia option is linked to four indexes: The Hang Seng Index (30%), the Nikkei 225 (30%), the Kospi 200 (20%) and the HSCEI Index (20%). The World Option is linked to four equally weighted indexes: the FTSE 100, the S&P 500, the DJ Eurostoxx and the Nikkei 225.
The sixth issue of Quartet was launched in October. The sterling deposit version offers a straight participation option of 100%, while the guaranteed minimum return option offers the greater of either the minimum return of 15% or 65% of any growth in the underlying index. "Quartet provides investors with the flexibility to be able to pick and choose desired options and acquire a balanced investment," says Ian Whiteside, financial planner at independent financial adviser Park Row. "The mix-and-match element of product has been extremely well-received by investors."
RBS has also placed an emphasis on amalgamating an actively managed style of derivatives, says de Mariveles. The result has been the Autopilot product, which is a multi-asset dynamic allocation strategy offering exposures to a wide spectrum of investment classes including equity markets, gold and property. Autopilot switches into underlying assets in a rising market but switches out of the assets and into cash in a falling market. For each of the investment classes, when a declining phase is detected Autopilot disinvests and switches the investor into a cash asset until the buying signals are again apparent and reinvestment occurs. Autopilot is structured as a deposit or note and is 100% capital-protected. The product is distributed to high-net-worth individuals, offshore IFAs and life companies.
Other noteworthy products distributed by RBS include the Protected Investment Fund, the Special Edition Bond Series and the Trilogy product which is linked to the UK housing market, UK stock market and interest rates.
The week on Risk.net, December 2–8, 2017Receive this by email