US wrap: Providers cater for all tastes with large and small-cap exposure

HSBC issuance taps small-cap performance

While the latest offering to the US market sees a strong interest in the benchmark S&P 500 index, structured product providers are catering to a range of investment views by offering exposure to small and large-cap stocks through the Russell 2000 and S&P 100 indexes.

The small-cap Russell 2000 Index is used as the basis of two HSBC accelerated growth products. One of these is the Accelerated Market Participation Securities linked to the Russell 2000 Index, which has a one-year term and offers 300% participation in the index with a cap at 25-30%.

There is no downside protection, which probably explains the fairly high riskmap score of 6.4, as the Russell 2000 has low annualised volatility of 29%. The index is up 4.79% in the year to date.

At the other end of the spectrum, Bank of America is offering exposure to the large-cap S&P 100 index. Total returns for this index are down 1.43% in the year-to-date, mirroring the general trend over the past few years of small and mid-cap companies outperforming blue chips.

The product is a three-year accelerated growth structure with a participation rate of 115-130%. Three years is a long term for an accelerated growth product, and although participation is low compared to the market norm, returns are uncapped. There is a 10% downside buffer and the riskmap score for the product is low at 4, while it scores well overall at 8.4.

The latest issuance offers much more variety than has been the case recently. The four main product types (reverse convertibles, accelerated growth, review and principal-protected) that feature in public issuance all make an appearance, and most of the frequent players have issued products.

There is also a mix of reverse convertibles on offer, but the banking sector crops up in a handful of products with Citi, Morgan Stanley and Wells Fargo used as underlyings.

Details of the latest issuance are available here