Structured Products Americas Awards 2016
Lasting success in the tough US retail structured products market cannot be achieved overnight. A carefully pitched strategy, a focus on client care and constant reappraisal of distribution channels are three core ingredients to success - and are the three elements JP Morgan successfully combined to emerge as this year's retail structuring winner.
The bank ended 2015 with an increased market share in the private bank client segment, with notional traded in this channel increasing 32% year-on-year. The foundations supporting this strong growth were laid in 2014, when the bank overhauled its distribution efforts and aggressively sought out new partners to get its products in front of clients.
"We embarked on a series of initiatives – including reorganising the team – in 2014, and a lot of what is characterised as success here is because those efforts have taken shape and hit home," says Daniel Roose, an executive director in the cross-asset structuring team at JP Morgan in New York.
The bank recently reorganised its coverage team to better tailor its sales support to different distributor types, with a focus on product suitability for differing client sets. It places great emphasis on its sales teams knowing who a distributor's end-clients are – allowing it to make a call on whether it would be appropriate to market securities such as volatility products through large brokerages, for instance.
This allowed for the full capabilities of JP Morgan's franchise to be more effectively leveraged, whether in servicing high-volume clients or offering the full cross-asset offering of products.
Clients testify to the bank's market-leading status: "JP Morgan are best in class. They are fast and their team is well-staffed. They are our best counterparty [and are] consistently reliable – it's a well-oiled machine. I've never had an issue with them," says one executive at a major broker-dealer.
The head of structured products at a large US private bank says JP Morgan has "consistently been the most attractive on shorter-dated notes", while a product manager at another large US broker-dealer says the bank is "always" among the leaders in its league table of issuers.
An executive at a Canadian broker-dealer praises JP Morgan's efficiency "on many different deals", adding "their pricing [is] good with all options and [they are] effective in all underlyings."
The bank is also realising gains from collaborations with external parties first forged in 2014. Pitching to independent broker-dealers can be a challenge in a crowded market, so JP Morgan turned to Hybrid Financial, a Canada-based provider of distribution services, to help its message cut through.
For the registered investment adviser (RIA) channel, it teamed up with Cais, a centralised structured product platform, to grab wealth managers' attention. The tie-up led to a 50% increase in notional amounts traded with RIA clients year-on-year.
Not only do we offer our trading capabilities, we partner with insurance providers to offer a holistic solution that we believe is end to end
Larry Wilson, JP Morgan
The bank is also very proud of its success in driving the growth in fixed indexed annuity (FIA) products. Sales of these retirement products hit $54.5 billion in 2015 – a 13% increase on 2014 figures, according to the Limra Secure Retirement Institute, and JP Morgan has played its part in contributing to a substantial chunk of this growth.
In June 2015 Nationwide, a leading mutual insurer, launched its suite of New Heights FIAs referencing JP Morgan's proprietary Mozaic index. Sales were strong – and JP Morgan shared in the success by providing options hedges for the $2.4 billion notional shifted by the insurer in the product's first six months on the platform.
The performance of the index, which has generated a 5.41% return in the year to date, has been a strong factor in the product's success, but the bank has also made hands-on client care a priority.
"The feedback we've received from our insurance clients is that our approach is unique. Not only do we offer our trading capabilities, we partner with insurance providers to offer a holistic solution that we believe is end to end," says Larry Wilson, managing director for equity derivatives sales for North America at JP Morgan in New York.
The bank also finalised the launch of its ETF Efficiente 5 Index as an FIA crediting strategy with annuity carrier Symetra in March 2015, with the latter setting record sales numbers in the following months. The index generates returns by investing in exchange-traded funds and a cash index, providing exposure to a range of assets.
The bank's investible indexes franchise has also been a key strength. Flagship indexes such as ETF Efficiente 5 and Mozaic have been available as structured note underlyings since 2010 and 2009, respectively, but last year JP Morgan diversified the range of vehicles investors could use to access its index suite.
To do so, it created a private fund platform which provides investors returns on a selection of indexes – including a popular commodity carry pairs strategy – without having to enter a swap or structured note transaction.
JP Morgan also took its index expertise to markets outside the US, generating interest in principal-protected notes primarily linked to the ETF Efficiente family of indexes.
The bank also made inroads with its US Focused Balanced Index series, showcasing its talent for quanto options – where the settlement currency is different to that of the underlying – by including a daily hedging feature to immunise Canadian dollar investors from fluctuations in the US dollar/Canadian dollar exchange rate.
"In Canada, we have adapted our strategy to showcase one of our main strengths: the ability to bring new solutions that the market hasn't seen before and which engage investment advisers," says Wilson.