Congratulations on your first year as a distributor of structured products. What does 2007 have in store for JVB?
We are thrilled with our quick entry and rapid growth over the past 10 months, but none of this would be possible without the hard work and commitment of the broker-dealers we've built relationships with over the years. Our number one focus for 2007 is expansion into new products. We recently began distributing index-linked certificates of deposit and we plan on pursuing a number of principal-protected notes as well.
With competitors such as InCapital and LaSalle, the distribution of structured products is a highly competitive arena. What made JVB decide to jump into the structured products business?
It is true that LaSalle and InCapital are large wholesale distributors, but sometimes the size of your business and the number of products that you sell can take away from your focus on specific asset class. One of the good things about JVB is the opportunity we have to operate our desk as a standalone business. This separation gives me and my team the ability to call on all the clients that we've worked so hard at developing relationships with over the past 20 years or more of team experience. Also, our singular focus on structured products allows us to react quickly to the needs of our clients.
How do you distinguish yourself from the competition in structured products distribution?
From the start, we have set ourselves apart from the competition by trying to fill the void of what we perceived was missing from the retail broker dealer community here in the US. For instance, before we entered the market in April 2006, there were no three-month and six-month reverse convertibles available to the broker dealer community at large. The only three-month reverse convertibles that were being issued were sold to Latin America. We saw an opportunity to make a name for ourselves by becoming the distributor that was known for their short-term reverse convertible offerings. In our second month of business (May 2006) we launched a three-month Valero offering which sold just over $6.8 million?
JVB recently placed one of the most successful new innovative products with Ixis' Dogs of the Dow reverse convertible. Why did this investment resonate with so many investors?
I believe one of the biggest contributing factors is the over-abundance of reverse convertibles in the market-place every month. The retail representatives that are out there selling these products realise the need to come up with new ideas and concepts, otherwise it becomes the same pitch but with a different name every month. This was another opportunity where we could stand out from the competition by bringing out a strategy that hadn't been done and could also lend itself well to the reverse convertible product. The Dogs of the Dow sales strategy had a proven track record and there was a widespread knowledge base around which to leverage the offering. The 'least of' reverse convertible basket is a structure that sells very well in Europe, but up until this point it hadn't caught on well in the US. Our Dogs of the Dow deal last month was not only the single largest monthly reverse convertible issuance for January, but I believe it was also the largest 'least of' reverse convertible basket done through the third-party distribution network here in the US to date.
What are the challenges to growing the structured products industry? From your perspective, can this investment give mutual funds a run for the money as a mainstream investment?
I think our biggest challenge is the lack of education about the merits of structured products, how they work and the opportunity they pose for all portfolios. One of our goals for 2007 is to educate our clients. We are going to spend the next 12 months focused on doing conference calls, sending educational materials and visiting our clients in an effort to increase the comfort level within the structured product space. I think we need to see two things happen before we give mutual funds a serious run for their money - first, I reiterate that we need better understanding of the products by the broker-dealer community; and second, we need more media coverage by the likes of CNBC and the Wall Street Journal.
You recently came back from JVB's first conference on structured products in Breckenridge, Colorado. What are your clients saying about structured products and their place in portfolios?
We received a positive response from the broker-dealers that attended the conference. They really appreciated the fact that we didn't just cover the basics, we gave them new ideas and structures that they hadn't seen before. I had several traders come up to me after the conference and tell me they are excited about the ideas and they expected to see an increase in their business in 2007.
JVB currently has existing distribution agreements in place with Ixis, Calyon and HSBC. Is your platform all set, or can other providers come in with their products?
The structured products space is an ever-changing environment and one that commands constant attention. I wouldn't be doing my job properly if I said that we didn't want to speak to everyone and listen to every provider's ideas, but at the same time I can tell you that we are very happy with our current distribution arrangements.
In fact, as of February this year, HSBC officially decided to use JVB to distribute 100% of their monthly reverse convertible offerings.
We keep hearing that education is going to bring structured products to the next level. What is JVB doing in this regard?
We are currently in development of a new website which will include all of our structured product offerings as well as the supplementary documents that accompany them. We are also working on creating new brochures and marketing materials that our broker-dealer clients can use to market to their retail clients.