Breakout issuer of the year: Natixis

Strong performance in core markets sees French lender close the gap on Europe’s largest issuers

aurelien rabaey of natixis
Aurélien Rabaey, Natixis

Structured Products Europe Awards 2016

The rapid progress made by Natixis in structured products markets over the past couple of years has been eye-catching. But, for all its global ambitions, the French bank's foundations have been built on stellar performance in its domestic market.

Many observers point to the appointment of Eric Le Brusq – previously global head of equities and derivatives sales at rival BNP Paribas – as global head of sales and engineering in early 2014 as a game changer for the the bank's issuance platform.

Since joining, Le Brusq has spearheaded "a new strategy focusing on innovative and tailor-made solutions, which [has] allowed us to gain new market share and greater visibility in the structured products market," says Aurélien Rabaey, Paris-based global head of financial engineering and head of equity derivatives sales for Europe, the Middle East and Africa at Natixis. Rabaey also joined the firm in 2014 after a decade spent at Societe Generale.

Strong gains in market share have gone hand in hand with some very good revenue figures. Natixis says equity revenues grew by 26% in 2015, while equity derivatives revenues surged by 44%.

Clients attribute the bank's penetration of a mature market in a comparatively short period of time to its focus on innovation, particularly its family of so-called market access indexes. Its flagship product is the Cac Large 60 Equal-Weight Excess Return (Clewe), developed in partnership with Euronext.

In 2015, the bank noticed there was now much more domestic issuance in structured products referencing the Euro Stoxx 50 than the Cac 40, despite French investors' traditional preference for local names. In 2013, for example, there was almost six times more notional traded on the Euro Stoxx 50 than on the Cac 40.

One reason cited for the trend is that dividend futures on the Cac 40, which traders use in order to delta-hedge their books, are fairly illiquid and expensive. Products referencing the Cac 40 are therefore often pricier for investors.

The Clewe was put together with the aim of designing structured products against it in mind. A fixed annual dividend of 5% got around the need to hedge dividend risk, allowing the bank to lower costs significantly. Adding a further 20 sizeable mid-cap stocks to the French top 40 also offered investors some diversification.

By mid-September 2016, the Clewe accounted for 16% of total sales volume in the French retail market – appreciably more than the Cac 40 and second only to the Euro Stoxx 50. The new index has also performed comparably with the Cac 40 and Euro Stoxx 50 over the past 12 months.

"The new generation of indexes, [which are] transparent and easy to understand, give local investors enhanced access to their domestic stocks through structured products," says Rabaey.

The Clewe has been followed by similar indexes designed for Belgium, Spain, Sweden and the UK, for which Natixis holds the exclusive licence. The chance to escape the headlock of the Euro Stoxx 50 with the creation of the BeNe 40 Equal Weight Index has shown particular appeal for Belgian investors.

"We thought the BeNe 40 would be very interesting to our clients, also from the viewpoint of diversification, because many structured products are linked to the Euro Stoxx 50 or other benchmark indexes," says Klaas Van Iseghem, structured products specialist at Societe Generale Private Banking in Ghent.

Rapid expansion in any market can present challenges, however. Realising that the fast-growing volume of sales of structured products sold by retail branches was causing difficulties for its sales staff, Natixis developed bespoke massive online open courses (Moocs) and Webex seminars to help staff market products more effectively.

In the past year, sales teams have done more than 600 Webex calls on eight products, and the bank has developed dedicated Moocs for Caisse d'Epargne, SwissLife Banque Privée, Crelan and Deutsche Bank. It has also developed dedicated websites for Banques Populaires, Caisses d'Epargne and Deutsche Bank Belgium.

A partnership with Swiss Life AM yielded a new smart beta fund in March 2016. The SLF Fund Equity Global NXS Protect is designed to appeal to institutional buyers who wish to minimise their Solvency II capital consumption level. The fund is managed by Swiss Life but Natixis provides a dynamic overlay hedge created by daily put buying, which is partly financed by selling short-term calls. This strategy has reduced market volatility by 50%, according to Natixis.

Natixis will continue to promote smart beta products and market access indexes in 2017, says Rabaey. He adds that the bank is also excited about the possibilities of green bond equity-linked instruments in the coming year.

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