Natixis’ Eric Le Brusq tells IFR that custom indices have revived French structured products
May 31, 2017
Low interest rates have sapped demand for structured products as it became prohibitively costly to provide a full capital guarantee. While investors have settled for the partial protection afforded by autocallable notes, structuring remains a challenge as issuers juggle near-zero rates and razor-thin distributor fees.
In a recent article for IFR, Eric Le Brusq, global head of equity derivatives at Natixis, explains how Natixis has raised over €2.2bn from products linked to a customised CAC 60 – an equally-weighted index that combines constituents of the CAC 40 benchmark of Paris-listed blue chips with the next 20 largest stocks. After reinvesting net dividends, the index pays out a fixed 5% annually, eliminating the dividend risk and enabling issuers to structure products with chunkier yields and improved capital protection.
“In a context where investors are very keen to invest into Europe – and France in particular, given the recent elections – a lot of overseas clients are interested in this index,” said Le Brusq. “The fixed dividend means that we can optimise the way we structure products to offer higher yields to clients and with the benchmark at least equalling or outperforming the CAC 40, clients are very satisfied.”
According to Le Brusq, the index has now effectively replaced the CAC 40 as the main underlying for French-focused structured products, with issuance referencing the new index outpacing its better-known counterpart by 10 to one.