Some follow the market while others move it. Within non-flow FX-linked structured products in Asia this year, BNP Paribas falls in the latter category.
“Historically, the FX-linked structured product space has been dominated by short-term structures at private banks in Asia,” shares Ken Tan, head of FX investor solutions sales, wealth management & family offices, global markets APAC, BNP Paribas.
“But as markets had been plagued by rangebound trading, it became increasingly self-evident where FX maturity lengths were heading. In 2017, we focused on steering our private bank clients into longer-dated structures to enable them to take a strategic view, perhaps with a tactical spin, with the aim of achieving optimum entry levels.”
Such long-dated structures include 3-year worst-of target knock-out certificates, where the client takes a view on two currency pairs (EURGBP, for example), taking the dual view of being bullish on EURUSD and bearish on GBPUSD. This specific solution that BNP Paribas delivered to clients leveraged on the fact that private banking clients in the region were concerned about fixed income risk but did not wish to diversify if it meant materially sacrificing yield.
“There is a very relevant private banking reason for encouraging our clients to adopt these certificate notes,” says Ken Tan, head of FX investor solutions sales, wealth management & family offices, global markets APAC, BNP Paribas.
“We observed private bank’s increasing concern about fixed income risk without compromising yield, so we decided to offer a bond alternative. These structures have capital protection and provide decent yield enhancement. Private banking clients had been piling a lot of funds into emerging market bonds and fund-linked structures; we wanted to offer something in the FX space to help diversify risk and yield sources.”
Any solution that can achieve yield without adding to fixed income concentration is a welcome addition in Asia. But to do so while significantly lengthening the maturities of structured products from historical 3-6 month levels is nothing short of evolutionary. Private banks in Asia agreed, selecting BNP Paribas as 2017’s Best Provider of Non-flow FX-linked Structured Products.