The Asset Triple A Derivatives and Structured Product Awards 2014 honour the region’s leading market participants in the structured investment product, derivatives and index categories.

This year also marks The Asset’s inaugural structured investment product survey. The results, based on 122 responses, highlight a revival in appetite for equity and hybrid derivative products among institutional investors, with these categories leading across asset classes to which they are seeking to increase exposure.

Investors were asked why they use external structured investment product providers, and the leading response was “to generate better performance” (score indexed to 100) followed by “diversify into new asset classes” (65) and “reduce exposure to specific risk factors” (60)

While the pursuit of better performance is the key reason for using structured investment products, the results suggest that service levels are also important.

Asked to name the three best providers of structured investment products “in terms of delivering expected risk-adjusted return” and “in terms of service and support provided”, the results hint at the different requirements of institutional and individual high net worth investors. A total of 19 different banks are named, suggesting the high level of competition in the marketplace.

An expanding market means that it is increasingly difficult to cater to the needs of all investors across asset classes. This year’s winners have succeeded in identifying market segments they can excel in and invested in capabilities to deliver a comprehensive range of products and solutions to these investors. Automation and electronic distribution proved to be crucial factors in tailoring offerings to different client groups.

Not surprisingly, competitive pricing emerged as the most important attribute/quality of structured investment product providers overall. Service and support model ranked only seventh while ability to generate superior returns ranked ninth.

Structuring expertise, timeliness as well as trustworthiness and transparency all placed second in the rankings.

The higher importance given to structuring expertise, compared with product innovation which rated sixth, suggests that respondents differentiate between expertise and novelty. They are not taken by innovation for innovation’s sake. They also underline the importance of automation, timely delivery and competitive prices.

The decline in the importance of product innovation has been a consistent feature since the financial crisis, and is reaffirmed by the survey results.

At the same time, investors appeared to be more receptive to innovation over the award period than they had been for some time. One driver has been the fact that Asian investors are increasingly looking outside the region for investment opportunities, creating a demand for innovative structures. Further, innovation continues to broaden beyond products to different delivery formats and collateral options.

Trading expertise ranked fifth followed by product innovation, service and support model and financial strength and stability (which ranked eighth).

The relatively low ranking for financial strength suggests that investor concerns about counterparty risk have eased. Structured product providers such as Societe Generale have taken steps to assuage concerns; offering investors alternatives to being exposed to their credit risk has become a norm.

 

 

Derivatives House of the Year

BNP Paribas

 

BNP Paribas has steadfastly invested in its two derivatives platforms – fixed income and global equities and commodity derivatives – as it seeks to be viewed as a reliable and consistent provider across asset classes. It has risen to the challenge of meeting the evolving needs of clients amid ongoing changes in regulatory and market conditions. It has widened product offerings across asset classes. The ongoing low interest rate environment has allowed it to demonstrate leadership from lightly-structured investment products to hybrid products. The franchise is able to leverage a well-established network of regional offices throughout the region.

 

 

Best Structured Product House

Societe Generale

 

Societe Generale continues to invest in its structured products franchise at a time when many are scaling back. It increased headcount by 10% on all asset classes in the first half of 2014. The trend is a continuation of a strategy in place since the financial crisis, when it was quick to build up cross-asset capabilities. The acquisition of a 100% stake in broker Newedge is reinforcing integration covering trading teams, information systems, financial engineering and commercial expertise. Enhanced capabilities add to an already industrialized offering when it comes to bespoke structured products. The bank has now deployed auto-pricing capabilities in the regions where it is operating, enabling it to rapidly showcase best-in-class product design.

 

 

Best Equity Derivatives House

Credit Suisse

 

Credit Suisse reaped the benefits of a revival in appetite for a broader array of equity derivatives products. The key has been its ongoing commitment to, and strong presence in, the region’s main structured products markets. It claims market leading positions in key product categories in markets ranging from Hong Kong to Japan, Korea and Taiwan. Underpinning its success is the well-established Spirit Asia web-based electronic structured notes platform, with over 95% of private bank quote requests priced electronically. Internal demand from private bank clients accounts for over half of total notional on the platform. The substantial flow business ensures that timely, client-centric market leading structuring solutions are delivered, highlighted by recognition for the RAII HOLT Index Fund as Best Structured Investment Product (Multi-Asset) and Spear Dynamic Asia Strategy as Highly Commended Structured Investment Product (Equity).

 

 

Best FX Derivatives House

BNP Paribas

 

BNP Paribas has invested in strengthening its Asia FX derivatives business in recent years, developing a balanced business split between G10 currencies and local currencies plus hybrids. A greater focus on local currency structures has seen more potential for cross-asset hybrids. Organizational changes have been implemented to cater to evolving client needs. In recent years, areas of expertise have built up in Singapore (FX options trading) and Hong Kong (structuring). The bank has been quick to capitalize on technology, market structure changes and new regulation opening up opportunities to tap into a broader base of customers centred around electronic distribution. In the year since it went live, its e-trading platform – Cortex FX – has been well received in the market, offering excellent service and support across a comprehensive range of products.

 

 

Best Rates Derivatives House

BNP Paribas

 

The environment for interest rate derivative structures has remained challenging during the award period. Expectations for rising yields diminished appetite for long dated investments. BNP Paribas responded by focusing more on collateral and cross-currency management as areas for yield enhancement, bringing its long tradition of innovation to local currency structures alongside US dollar investment backed by a repackaging of Asian government bonds.

 

Best Credit Derivatives House

Societe Generale

 

Credit is a growing part of Societe Generale’s cross-asset product offering. The bank has tapped into investor demand to diversify credit risk, innovating bond repacks and credit-linked notes on a wide range of indices. One example of innovation is highlighted by The Asset’s recognition of the 4x Leveraged RQFII Bond Repack Notes as Best Structured Investment Product: Credit. Leveraged access to China’s onshore bond market was delivered within one month in response to investor demand. The SGIS issuance programme, launched over the award period, also highlights awareness of investors’ requirements for choice of issuance format and collateral. Additionally, a credit flow desk was set up this year to strengthen coverage.

 

 

Best Commodities Derivatives House

Societe Generale

 

Societe Generale’s commodities franchise benefited from a trend among its competitors to reduce the size of their commodity derivatives businesses amid tighter regulations and lower profits. Its franchise is underpinned by strong fundamental research highlighted by product launches over the award period. This included the launch of an investable index of 12 commodities most sensitive to supply/demand dynamics (SDCI) in September 2013. Recognized as Best Structured Investment Product (Commodities), the SG Seasonal Factor Commodity Index (SFCI) met strong interest ahead of its launch in April 2014. Both strategies promise to deliver portfolio diversification benefits.

 

 

Best Alpha Index Provider

Barclays

 

Barclays has long been a pioneer in designing quantitative index strategies for various applications. As a market leader, the bank has been well positioned to serve the demand for algorithmic quantitative index strategies from investors. Steady growth of institutional assets under management in the region drives demand for such rule-based strategies in addition to existing managed solutions. Moreover, quantitative index strategies can be used in a wide variety of market conditions to address specific investment objectives, the Barclays Shiller CAPE family of indices being one example.

 

 

Best Beta Index Provider

FTSE

 

FTSE has demonstrated innovation across asset classes in 2014, developing a variety of new benchmarks for Asian and international markets, including working with the Asean exchange group to enhance benchmark solutions in the region and providing a customized solution for institutions in Japan to hedge foreign currency exposure. It also fortified its position as a leading China index provider with the launch of the FTSE Global RQFII Index series that enable market participants to include China A shares in global benchmarks at the time of their choosing. FTSE also partnered with BOC Hong Kong to jointly develop a new offshore renminbi bond index in October 2013. ETFs tracking FTSE China benchmarks exceeded US$20 billion in AUM by end-August 2014.

 

 

Best ETF Provider

Deutsche Asset & Wealth Management

 

Deutsche Asset & Wealth Management continues to play a strong role in developing Asia’s ETF market. It has broadened the range of ETFs that investors can access, making it easier for them to invest in Asia and lowering barriers to international investment for those based in the region. The award period saw it launch the first China A-shares ETF listed in both the US and Europe as well as the first small cap RQFII ETF listed in the US. It has proactively responded to changing market conditions, such as a rise in liquidity that allowed a switch from being synthetic to physically-backed for some Asia equity index-tracking ETFs. It has also continued to expand its range of Asia fixed income ETFs.

 

 

Best Asian ETF Provider

Mirae Asset Global Investments

 

Mirae Asset continues to pioneer the development of Korea’s ETF market. Assets under management (AUM) at home have doubled in recent years as its strategy of focusing more on institutional investors has paid dividends. Last year saw the introduction of synthetic ETFs in Korea, opening up more choices for investors to cost-effectively access foreign markets. Mirae Asset launched the TIGER China A300 ETF, for example. As a result of its expansion overseas, domestic Korean ETF AUM now accounts for less than half of Mirae Asset’s total ETF AUM. The ETF provider has established a global presence, with ETFs listed in markets ranging from Hong Kong and Australia to Canada, the US and Colombia.

 

 

Best Commodity Derivatives House, China

ICBC

 

ICBC has ridden a wave of increasing demand for strategy-linked products linked to precious metals in particular. The bank launched the first specialized precious metals department among China’s commercial banks back in 2009. Since then, it has expanded the franchise, accounting for the largest market share on the world’s largest spot gold exchange. ICBC offers paper gold, silver, platinum and palladium products; a very successful gold accumulation programme; as well as wealth management products with embedded options. Regulatory constraints mean that precious metals remain the focus of the franchise.

 

 

Best Structured Product House, Japan

Societe Generale

 

A focus on key client segments underpins Societe Generale’s continued success in Japan. At the same time, investments in automation and electronic distribution have enabled it to deepen and expand its franchise, growing its flow business to complement leadership in the non-flow space. The bank can point to continued leadership in Japan’s variable annuities market with the biggest share of new business. Tailoring products to the local market is achieved with the support of more than 20 dedicated sales and structuring staff in Japan. The cross-asset solutions group brings together equities, fixed income, currencies and commodities structuring capabilities, providing investors with a single, integrated multi-asset market solutions team.

 

 

Best Structured Product House, Malaysia

CIMB Group

 

CIMB continued to broaden its structured product franchise, adding headcount in credit and commodity derivatives in particular. Following an investment phase in 2010-2012, the award period marked a pivotal year for the group to achieve market leadership. The bank launched Malaysia’s first cross-border reference structured product last June. Amid a flat domestic rate environment, CIMB produced significant transactions that met investor demand for credit-equity and credit-FX hybrids alongside rates-credit hybrids.

 

 

Best Structured Product House, Thailand

CIMB Thai Bank

 

CIMB Thai has been a pioneer in Thailand’s local currency structured product market, building on its position as one of the most active Thai baht-denominated structured deposit issuers since June 2009. It has shifted from buying structured products as the principal investor and re-distributing them to becoming the product originator. This has opened up new opportunities for the bank, which expanded client education efforts to cover investors based in cities outside of Bangkok last year. It has broadened the range of its products since obtaining regulatory approval for its structured debentures master programme in October 2012, and this has underpinned its robust volume growth.

 

 

Derivatives House of the Year, Singapore

DBS Bank

 

DBS Bank continues to strengthen its market-making, structuring and distribution capabilities across asset classes. It has grown from strength to strength, building on its dominant position in Singapore dollar denominated products. Alongside FX, the bank has specialized trading desks for interest rates, fixed income, money market, credit, equities and commodities. Strong structuring capabilities enable the bank to manufacture treasury derivatives and structured products in-house. A 24-hour Singapore-based trading desk quotes both deliverable and non-deliverable currency pairs. In particular, the rise of the renminbi has helped propel the bank from being a traditional treasury product provider in plain vanilla instruments to a more comprehensive range of structuring capabilities across asset classes.

 

 

Best Structured Product House, Taiwan

Cathay United Bank

 

Cathay United Bank’s treasury marketing unit has witnessed double-digit profit growth since 2011 as it has capitalized on synergies to expand market share in structured products. Demand for a wider range of investment tools among its client base, boosting capabilities to warehouse risk in-house, extending product lines and introducing more innovative structures have underpinned this growth. The bank has continued to add resources to its structuring and sales team in 2013-2014, following rapid growth in 2012-2013.

 

 

Best FX Derivatives House, Taiwan

CTBC Bank

 

CTBC Bank was the first bank to acquire an onshore derivatives license following the launch of renminbi clearing and settlement on the island last year. The bank saw faster volume growth in FX derivatives than the market average over the award period, helping it maintain a market leading position despite an influx of competitors with the launch of renminbi-denominated products in Taiwan. Bolstering its leadership has been the launch of a wider range of exotic products and currency pairs. Rapid growth in volumes required upgrading of the bank’s derivatives system to support pricing and risk management.

 

 

Best Equity Derivatives House, Taiwan

Yuanta Securities

 

Yuanta Securities has retained its position as Taiwan’s largest broker over the past 15 years, built on a foundation of over 750,000 active retail clients. It has leveraged this position to meet the demands of a changing market landscape over the awards period. Deregulation of the brokerage industry has seen the entry of a more diverse group of investors. The establishment of offshore securities units (OSUs) broadened the product lines, combined with regulations, combined with regulations eased to allow sales representatives to see structured products directly to customers benefiting larger participants such as Yuanta Securities.