Asia’s structured product landscape is difficult to define given that many investment banks route such products via Europe or the US, says Marius Baumann, vice-president, global custom indices with S&P Dow Jones Indices.

 

In Europe, clients often have a two page-long list of products in the pipeline compared to only two or three products in Asia. The tenor of structured products in the region is usually for less than one year, limiting the need for a custom index.

 

He observes that products linked to multi-asset strategy indices are making a  comeback. “A few years ago, back in 2008-2009, this was quite a popular strategy,” he recalls. “But it became complex during the crash. Clients didn’t understand how the triggers worked nor the thresholds and pulled back from these sort of strategies. We’re seeing a return of multi-asset strategies.”

 

S&P Dow Jones Indices’ Asian custom index clients are primarily based in Japan, Australia and Hong Kong. “The indices they create are mainly for benchmarking and structuring purposes,” he describes, adding “In the custom space, a few years ago, we thought ETFs could follow suit from the trend in the US and Europe but that hasn’t transpired yet.”

 

Baumann remarks that some new clients have come to the market with proprietary indices based on the income-generating theme which has carried into 2014.

 

Structured product providers are key clients of S&P Dow Jones Indices’ custom indices business, which grew by about 10% in terms of revenue and number of indices launched globally last year.