Leonteq Highlights the Flexibility and Appeals of Structured Products for Asia’s HNWIs

David Meier, Executive Director of Investment Solutions Sales at the Singapore subsidiary of the Swiss-based Leonteq AG , gave an informative and detailed presentation to delegates at the Malaysia Wealth Management Forum. Armed with an informative, high-quality slide presentation, Meier highlighted the appeals of structured products as an ideal diversification tool that should be an active part of any well-diversified HNWI portfolio, offering potential returns in sync with the market perspectives of the investors themselves.

Meier began with a brief introduction to Leonteq’s products platform and to structured products themselves [see box below], which he clarified are financial products, that are packaged by using other existing financial products, such as securities, indices, commodities, debt issuances,foreign currencies and derivatives. Leonteq offers an integrated technology platform that enables the automation of all processes in the value chain for the production of structured investment products customised to the individual requirements of its banking platform partners. The scope of cooperation with banking partners can range from a semi-integrated set-up with only a few services and interfaces to a fully integrated set-up covering the entire product lifecycle.

Differentiation

“I presented here last year,” Meier began, “and this year I want to expand on that introduction. Our state-of-the-art technology-driven platform is one of our key differentiating factors. From the outset, we focused on the creation of an IT infrastructure from the ground up. This allows us to straight-through efficiently automate all the processes from front to back end, giving us a speedier time to market and lower issuance costs. The result is that very high levels of automation lead to competitive cost per issued product, as well as allowing for small ticket sizes. This, in turn, means we can tailor-make a product for each individual client, instead of just taking a product from the shelf.”

The business model is another core differentiating factor. “We have created a white label strategy to offer our platform to other banks, so they do not have to develop it themselves from scratch. We take care of the whole issuance process but issue the products on the balance sheet of the other banks, allowing your clients to profit from the brand and name recognition of those banks.” What this means to investors is that they have the flexibility to choose between different issuers on the Leonteq platform.

Made in the image of the investor

Clients like Financial advisers, asset managers and banks can work with Leonteq’s platform to design products with customized risk-return preferences of their customers. They facilitate highly tailored payoff objectives adapted to individual investor’s market expectation.

“We take traditional financial instruments and package them together in one product to replicate a client’s market view and risk appetite on behalf of the banks and other financial intermediaries which then distribute it to their own client base.”

Pay your money, take your choice…

Structured products, Meier elucidated, can be used to take any kind of market view and any kind of risk appetite. “To simplify things,” he explained, “we structure products that are essentially in three groups - low, moderate and higher-risk. The beauty of our platform is that we can customise Structured Products according to the risk tolerance and market outlook for each individual client as opposed to a mass product off the shelf.”

This, Meier explained, means that investors with a low-risk tolerance are likely to opt for structures with capital protection allowing them to participate modestly in any upside. If the client has a moderate risk proclivity, the investor is likely to prefer conditional capital protection, offering a higher yield provided that there are no significant drawdowns in the markets. If very bullish, the investor might opt for less capital protection, and possibly some leverage. “This middle category is very popular with investors in this region,” Meier added.

Win-win for all parties

Meier then told the audience that structured products are not designed to be a win-win for the issuers and distributors, while at the expense of the investors. “That,” he stated, “is not how structured products work. When an investor enters a structured product with us, we are fully hedged, so our interests are aligned.”

He also debunked the misconception that an investor is trapped stuck in a structured product for its duration. “We diligently provide a liquid secondary market that allows an investor to take profits or cut out with mitigated losses,” he explained.

Meier closed his talk by reiterating that SPs are instruments that can be fully customised based on the risk-reward profile of each individual client, and that Leonteq’s platform offers wealth management firms the choice of either distributing Leonteq products directly to their clients, or the firms designing and distributing their own products by leveraging Leonteq’s whitelabeling platform.