Structured product issuers in North and Latin America are used to dealing with uncertainty. But even by these markets' standards, 2015 proved a rollercoaster year.
In the US, manufacturers scrambled to adapt to sweeping regulatory reforms while contending with the dual challenges of an unpredictable rates environment and resurgent volatility. Latin American markets, meanwhile, had to contend with wild currency swings and tepid economic growth – a climate rarely favourable to structured products sales.
Firms that proved their mettle in the face of adversity were the big winners in this year's Structured Products Americas Awards. Credit Suisse was crowned North America house of the year for scoring a number of successes in the tricky environment. It managed this while simultaneously winding down its US private bank, which cut off a crucial distribution channel for the Swiss issuer's paper.
Last year, the bank increased structured note issuance by 4% and secured a 20% growth in exchange-traded note assets under management, despite the market as a whole declining by roughly the same amount.
Firms that proved their mettle in the face of adversity were the big winners in this year's Structured Products Americas Awards
It also reaped the rewards of years of patient work forging new partnerships with registered investment advisers and external wealth managers. This year saw Credit Suisse complete its onboarding of every major private bank in the US, and strike a deal with Wells Fargo to distribute certificates of deposit linked to one of its proprietary indexes, filling a troublesome hole in its issuance roster.
In Latin America, BNP Paribas is named house of the year, thanks to its efforts developing the Brazilian market for structured certificates, known locally as certificado de operacoes estruturadas (COEs).
The French bank pioneered a pricing system for third-party distributors of its COEs in the hopes of presiding over an issuance boom in the near future. BNP Paribas is also selling COEs referencing multiple underlyings through its own local private bank in order to stoke the market.
The bank also impressed clients in other countries across the region. "We traded with BNP Paribas for about 10% of our [structured products] business in 2012. Now it's more than 50%," says one Latin American distributor.
"They are one of the most active and responsive counterparties. Their research is very good and they are one of our best counterparties in terms of pricing."
Riding the FIA wave
The shifting investment trends of the US's lucrative baby boomers offer ripe opportunities for issuers to expand their product ranges. Sales of fixed indexed annuities (FIAs) are soaring as US retirees search for alternatives to the once all-conquering variable annuity, which has seen its reputation tarnished by a string of negative press articles reporting on high fees and poor performance.
Every issuer hopes to ride the FIA wave, but it is JP Morgan that scooped the plaudits, thanks to the launch of Nationwide's New Heights annuity, which credits investors with returns linked to the US bank's proprietary Mozaic index. The success of this product earned the US firm the deal of the year award and also helped it land the retail structurer of the year award.
Issued in June 2015, the New Heights series sold $2.4 billion notional in its first six months. Investors are happy, too – the Mozaic index has grown 5.41% year-to-date. Larry Wilson, managing director for equity derivatives sales for North America at JP Morgan in New York, credits the bank's hands-on approach to product development for the success.
"The feedback we've gotten 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'," he says.
Elsewhere, Societe Generale Corporate & Investment Banking scooped the institutional structurer award for its strong capabilities in collateralised financing. A host of clients testified to the French bank's prowess in building credit lines, loan facilities and letters of credit underpinned by a variety of atypical assets. One fund product manager says its flexible approach was what made it stand apart from the crowd, along with a willingness to design solutions that "hit all of the buttons that we needed".
The risk manager of the year award was claimed by Barclays. A responsive attitude to incoming legislation and supervisory initiatives led to a number of divestitures and restructurings in 2015 that place the UK bank in a stronger position to navigate the regulatory minefield to come.
This year also saw Richard Maile of JP Morgan awarded Structured Products' inaugural outstanding contribution prize. This is due to his tireless efforts honing new US tax laws relating to equity-linked investments included in Section 871(m) of the Internal Revenue Code. Sources close to the drafting process say he was "enormously helpful" in developing the so-called substantial equivalence test that will help sweep a host of equity-linked structured notes out of scope of the new rules.
Congratulations to these and all our winners. We look forward to receiving nominations for next year's awards process in January 2017.
Roll of honour
- Regulators to scrutinise CCP default auctions
- People moves: Bank of America names new Apac chiefs, Wilkinson leaves LGIM, Lloyds loses Coutte, and more
- VAR surges, revenues tank at French banks hurt by volatility
- A rush on Libor fallbacks to head off holdouts
- Swaps data: SOFR volume and margin insights