Structured Products Awards

Structured Products Awards 2010-11

We reveal the house and product winners of our annual Structured Products Awards for 2010-2011.


Barclays Capital

Barclays’ commodities business is a global heavyweight that dominated commodity note issuance during 2010, with more than a quarter of the market share, according to In Asia, the mainly Singapore-based team comprises around 35 staff who are part of a global team of 270 sales people and traders, with offices in energy and commodities hubs around the world.

That strong institutional knowledge, bolstered by the acquisition of Lehman’s North American commodities business in 2008, feeds into the structured products and solutions that Barclays can offer its clients in Asia and elsewhere. The bank’s commodities index business, for example, is a market-leading platform that Barclays can deliver in any number of ways, from swaps and options to notes, funds and full-fledged structured products. And it certainly helps that the bank has a strong AA- credit rating, minimising counterparty risks.

The bank has also been investing in its physical platform since 2008, including a doubling of its gold imports into India during 2010. This physical capability gives the structured team flexibility to offer both cash and physically settled structures, depending on an individual client’s needs.


Remarkably, for a product that suffered more than most as a result of the financial crisis, UBS says that its equity derivatives business had returned to pre-crisis levels by the first quarter of this year — at least in terms of volumes. The Swiss bank has capitalised on that renaissance (which seems an appropriate term for a market that came close to dying in 2008) after a period of reflection. It lost the core of its team to Credit Suisse after the crisis, but has since hired a number of senior staff, including six new managing directors in the space of a year, who have helped take the business in a new direction.

It is no secret that UBS’s pre-crisis equity derivatives business in Asia made the bulk of its money from selling commoditised products such as accumulators to clients of its vast private bank. That was good in 2006 and 2007, but to build a more sustainable business UBS has since been busy broadening its product range and targeting new types of clients. Corporates are now a much bigger focus and, although it still has the best execution platform in the business, it is now a more serious competitor at the tailored end of the market where clients are willing to pay bigger margins in return for alpha-generating solutions.

At the other end of the spectrum, it has also made strides in building its flow derivatives platform on the back of its existing cash equities business, its extensive research capability and its access to Asian markets.

Deutsche Bank

Even for a German bank, Deutsche is a very well organised derivatives machine — and uniquely so in some areas. While structurers at many banks sit in asset class silos, reporting up to a department head and having little to do with their peers across the floor, Deutsche’s structurers now sit in a separate team under a head of structuring, though they still work closely with risk managers, giving them an inside track on innovation, as well as with country and product teams.

The re-organisation has led to a slight reduction in headcount from back in 2008, but Deutsche says the result is a leaner team rather than a lesser one. And, of course, one that is better organised.

This emphasis on structuring has meant that a lot of the bank’s top coverage bankers and senior management have risen from the structured side of the business, including even Anshu Jain, Deutsche’s head of investment banking. And the result is a solutions business that dominates, particularly on the fixed-income side. Such solutions help clients to minimise the effect of accounting, legal and regulatory issues, among a host of other things — and helped Deutsche beat the downturn in the products business.

In today’s market, this well organised approach has made the bank stand out from its peers. Deutsche is neither the leading fixed-income player among corporates, where Citi and HSBC have strong franchises, nor in the lucrative hedge fund market, where US banks such as Goldman Sachs tend to lead. But the balance of its business gives Deutsche more resilience and, with a good list of clients on both sides of the market, it spends less time worrying about its own risks.

Societe Generale

Funds are not the hottest product right now, as investors strive for structures that offer significant out-performance against lacklustre benchmarks or else offer a more sophisticated cross-asset approach to unlock value or provide more efficient hedges.

But investors are also looking for transparency, and Societe Generale’s fund platform has long been open and transparent — even if the products built around that platform have not always been so straightforward.

The bank offers exposure to more than 150 asset managers, including big names such as Franklin Templeton, Black Rock and many others, as well as offering a broad range of products in tandem with Lyxor, Societe Generale’s dedicated asset-management arm. It is a comprehensive offering.

In August 2010, Lyxor brought the only guaranteed fund on the Hong Kong market — Lyxor China A 50 AUD 100% Capital Guaranteed Fund, which is designed to provide investors with a potential return linked to the performance of the iShares FTSE/Xinhua A50 China Index ETF while diversifying investment portfolio through an AUD denominated investment.

Another successful fund product during the year included an enhanced protected exposure to the BlackRock World Mining Fund for Malaysian investors, with a volatility target designed to allay fears of another big drawdown. Such structures use complexity to provide a better trade-off between risk and return for investors (in theory), while still taxing ambitious structurers.

Deutsche Bank

Foreign exchange is one of the most important elements of Deutsche’s solutions business — providing clients with localised, cross-asset hedging and investment products depends on strong local currency trading operations across the region. Though the period under review was not a great one for FX houses in Asia, Deutsche maintained its strong market position and helped lead the charge into new products, particularly in China.

Deutsche was in the first group of banks to win a licence to trade onshore renminbi FX options, completing the first announced trade right at the end of our review period. Earlier this year, it was also a pioneering participant in the opening of onshore cross-currency swaps to China’s corporate sector. At the start of 2011, Deutsche’s proprietary electronic platform, AutobahnFX, was the first electronic system to deliver streaming pricing for both offshore and onshore renminbi.

China is not the only country developing its onshore FX market. During 2010, Deutsche launched onshore versions of AutobahnFX in India, Malaysia, the Philippines and Thailand. Across the region, regulators are opening the door for new products that reduce reliance on offshore markets — and create opportunities for international banks that have the breadth of capability and expertise to provide increasingly sophisticated risk advice in a local environment. There are not too many banks that tick all the boxes in terms of onshore banking licences, local currency trading operations and structuring and distribution capabilities — combined with a good understanding of local tax and accounting regimes, and legal and regulatory environments. Deutsche is one of them.

Closer collaboration with the global banking side of the business after a bank-wide restructuring has also helped the FX team to find new business among Deutsche’s existing clients. During the review period, this collaboration led to a mandate for a $375 million three-month deal-contingent hedge on a private equity deal in India.



Bric Commodities Enhanced Index

Citi’s new Bric index was the best-performing enhanced index globally during the period under review, with a 37% return, and this year it has been the top commodities index overall, with a close to 15% return, according to Bloomberg. And Citi’s so-called Cubes index is in second place.

Taiwan Retail Note
Credit Suisse

This trade for Cathay Life represented the re-opening of Taiwan’s structured product market after the financial crisis. In June 2010, Credit Suisse became the first investment bank to launch retail products in Taiwan under the new master agent rules for distribution of structured products after a year of working with regulators. The product itself is a principal-protected eight-year structure that offers a total return of 6.22% a year through exposure to Korea’s Kospi index.

Cross-currency reverse repo

The client on this trade wanted US dollar funding against a local currency bond portfolio in Singapore dollars and Korean won at a time when offshore markets were closed. Nomura came up with a private bilateral solution that was much cheaper than an offshore dollar bond, even if it had been possible to get a deal done at the time.

JPY/SGD target advance knock-out forward
BNP Paribas

Two years ago, this deal would have been done in two trades as very few banks are willing to quote Japanese yen against Singapore dollars, but increasing intra-regional trade means that there is growing demand for illiquid currency pairs. BNP came up with a SGD/JPY target knock-out forward that allowed the client to cheapen its yen buying cost without tying him into a structure, and all quoted against Singapore dollars rather than the market convention of JPY/SGD.

China Select Fund

Fund-linked activity was muted during the period under review. This product from Citi provides exposure to Chinese equities, including China A-shares and other China equity investments around the world, combining local expertise with international infrastructure. The fund is managed by China Asset Management and is offered in seven currency classes.

Islamic callable JPY/MYR sinking fund
Deutsche Bank

Deutsche’s client, a Malaysian quasi-sovereign, was seeking to diversify its currency exposure away from ringgit to achieve a better fit with the profile of its overall business. To achieve this objective, Deutsche structured and executed a 29-year JPY/MYR callable sinking fund structure that was fully Shar’iah compliant and provided certainty of exit costs upon early termination.

Vietnam CDS Range Accrual CLN

Nomura’s client on this deal was restricted by regulation to investing in credit-linked notes referencing its sovereign credit, the Socialist Republic of Vietnam. However, the client had a high yield target that was difficult to match with interest rates so low. Nomura did so with a new product that adds leverage through the form of a range accrual coupon structure referencing the Vietnam credit spread. CDS volatility is not readily quoted in the market and the client had specific requirements that also required Nomura to price basis risk to the market.

For our full Structured Products Awards feature and write-ups, see the upcoming August issue of FinanceAsia magazine.

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