LONDON, May 25 (IFR) - Customised equity indices that have
been re-engineered to pay fixed dividends have helped to
reinvigorate demand for structured products by providing
improved pricing flexibility against a backdrop of low interest
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
Eric Le Brusq, global head of equity derivatives at Natixis.
“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.”
Plummeting interest rates sapped demand for structured
products as it became prohibitively costly to provide a full
capital guarantee. Investors have settled for the partial
protection afforded by autocallable notes, but structuring
remains a challenge as issuers juggle near-zero rates and
razor-thin distributor fees.
Fixed-dividend indices like the CAC Large 60 Equal Weight
Excess Return index aim to address that. Launched by Euronext,
the index, was licensed to Natixis in 2015. The bank has sold a
range of short and long-term notes, with a typical 10-year
autocallable on the benchmark targeting performance of 8%-10%
per year, depending on the protection barrier.
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.
“To a certain extent we helped the French market to recover
an index, as investors would typically look at the EuroStoxx
instead of buying a product linked to French stocks,” said Le
Research shows that equal weighting is a key factor in
equity index outperformance, providing investors with exposure
to the small equity risk premium. The index has returned 6.8%
year-to-date compared with 5.35% on the market cap-weighted CAC
Natixis has expanded its efforts across Europe. Last year,
the bank combined with FTSE Russell to license the FTSE 150. It
also licensed Deutsche Boerse’s Euro iSTOXX 70 Equal Weight
Decrement 5% index, which expands on the EuroStoxx 50 – one of
the most popular underlyings in the structured products market.
Products linked to the expanded pan-European benchmark have been
sold across continental Europe, with the US and Asia on track to
begin distributing the products.
According to Le Brusq, traditional structured products
buyers are likely to rush back to the market alongside rising
“I’m convinced that the day we have a significant increase
in interest rates, we’ll see the recovery of capital guaranteed
products and that should drive significant demand for structured
(Reporting by Helen Bartholomew)