Global markets climbed higher, volatility remained low and long-only investors were the big winners in 2017. But muted initial interest, primarily due to geopolitical concerns and high valuations, left some hoping for participation via better entry levels, defensive positions or exposures expressing more than just traditional long-only views.
According to Laurine de Montmarin, director, equity derivative non-flow solution sales, wealth management and family office cross-asset team, capital markets, BNP Paribas, two thematics have been prominent this year: equity market dispersion and fund derivatives.
“Dispersion thematic enables clients to enter different risk profile structures benefiting from potential dispersion among stocks and sectors over the past 18 months and we have already observed signs of decorrelation over single stocks,” de Montmarin explains.
“These strategies were initially being put to work amongst hedge fund clients in the region and we wanted to pass this on to the most sophisticated private bank clients. There are several different payoffs to adopt these dispersion models, using mostly stock baskets of US large caps.”
In addition to widely popular fixed income fund derivatives, BNP Paribas is also in the midst of exploring opportunities around thematic solutions through Delta One indices or via fund manager selection.
“This is an opportunity we are exploring in light of the popular demand for fund-linked notes this year, although the principal protection component is not always easy to achieve, especially for equity funds,” de Montmarin shares.
New innovations aside, BNP Paribas is also offering the option to make adjustments to its offering to adapt to client views, such as the addition of lookback features or global floors on classic payoffs. Proof of its commitment to being a solutions provider as opposed to a product manufacturer, the bank continues to seek ways to add value, for example, through opportunities in risk premia or ESG strategies.
This dual benefit of a having a leading platform and taking a solutions-oriented approach has led the bank to take award of Best Provider of Non-flow Equity-linked Structured Products in 2017.