Much like elsewhere in Europe, this has been a tough year for issuers in the Benelux region, as low interest rates and tight rules around distribution have placed constraints on complex products, with simpler instruments such as autocallables becoming the staple for many investors.
There were some exceptions, however, and BNP Paribas managed to stand out from the crowd with a number of impressive deals, while also winning high praise from distributors, corporates and institutions for the reliability of its service provision.
"Market conditions for structured products have been incredibly challenging since early 2014, with ever decreasing rates and a fairly volatile - sometimes unpredictable - regulatory environment. In this period, we developed new, innovative and price-efficient underlyings and brought new solutions to the market," says Gilles Staquet, head of equity derivatives sales for Belgium, the Netherlands, Poland and Turkey at BNP Paribas in London.
Among the most notable of the firm's recent successes in the Benelux region was a partnership with the World Bank to issue a series of equity-linked products known as Green Growth Bonds (GGBs). These bonds finance projects that help combat climate change, while the equity portion delivers returns based on BNP Paribas' Ethical Europe Equity Index (EEEI).
The backing of the World Bank gave the product additional cachet, and it has so far attracted $500 million globally in investment from both individuals and institutions. Belgium, the first country where GGBs were offered to retail investors, has accounted for $91 million of that total, raised in a six-week offering late last year. Even banks such as Belfius and KBC, which typically only distribute their own products, put the GGBs on their shelves.
People have realised that socially responsible investing doesn't come at the expense of performance
"It was a good opportunity for us, as the products were 100% capital guaranteed - a lot of our conservative investors bought it for that reason," says an official at a Belgian private bank. He was particularly impressed with the legal and marketing support provided by BNP Paribas, without which his firm might not have been able to proceed with the GGBs.
It has also been a stellar year for other products linked to BNP Paribas' EEEI in the Benelux region. Launched in April 2013, the index registered a huge leap in assets under management via structured products issued in Benelux since mid-2014, raising €1 billion ($1.1 billion) from then until September 2015. That is almost half the €2.2 billion invested so far in Europe in products referencing the EEEI. In fact, BNP Paribas sold so much against the index, it was having concerns over capacity and moved onto promoting other products.
"People have realised that socially responsible investing doesn't come at the expense of performance," says Staquet, noting that the EEEI gained 19% between the start of 2014 and the end of October 2015, compared with a 10% gain for the Euro Stoxx 50.
Meanwhile, BNP Paribas continued to launch innovative smart beta indexes designed for capital-guaranteed products that gained traction among Benelux clients. For example, the iStoxx Europe Next Dividend Low Risk 50 Index - designed by BNP Paribas and developed by Stoxx - offers robust performance with less volatility than the Euro Stoxx 50.
The first structure traded in September last year, and the index's performance in the 12 months to June 30, 2015 was +8.78%, compared with +6.07% for the Euro Stoxx 50. Over the same period, the volatility of the iStoxx Europe Next Dividend Low Risk was 13%, versus 20% for the Euro Stoxx 50.
One corporate client that bought several equity index products from BNP Paribas in the past year is very satisfied with the level of service; the bank is one of its two main investment product providers.
"Their pricing is competitive, their service is very attentive, and they provide good follow-up on products and regular advice," says the company's chief financial officer. "It's a very personal approach; we get a high level of access."
Yet another recent success story in the Benelux region is the well-established Guru strategy, a non-capital-guaranteed product for private banking and institutional clients. It uses a systematic, fundamental process to pick the most profitable stocks with the best prospects at the lowest valuation, rather than taking the usual market capitalisation weighting approach.
Across the seven Guru funds, the strategy had attracted a total of €2.7 billion in assets under management by the end of August 2015, more than trebling the €848 million raised by June 2014. Almost a quarter of the total investment in Guru worldwide (€633 million) is now accounted for by Belgian clients.
"Our leadership position in structured product issuance [in the Benelux region] has never been as clear as it was this year," says Staquet.
The week on Risk.net, December 2–8, 2017Receive this by email