16/10/2024

The third quarter of 2024  saw another busy period for the structured product retail sector. Already in 2024, we have seen the emergence of a new counterparty for UK retail in Canadian Imperial Bank of Commerce (CIBC), as well as the re-entering of an old one; Santander UK. These developments have been welcomed in the sector, allowing for additional counterparty diversity.

The sector has also seen a re-introduction of the Japanese stock market as an underlying index link, not since 2015 has the Japanese blue-chip index been used in the UK market, albeit as part of a dual index plan. We have to go back to 2007 to see the Nikkei used as the sole underlying.

In Q3, 215 structured products were issued in retail plan format, taking the total for the year to date to over 610. If this pace in terms of issuance continues until the end of the year, 2024 will mark the largest annual issuance on record.

Issuance

Q1

Q2

Q3

Total

204

193

215
       

Capital at risk

141

141

161

Autocalls

117

109

129

FTSE* Autocalls

88

78

88

Income

22

30

32

Growth

2

2

0
       

Deposit & Capital ‘protected’

63

52

54

*Includes FTSE 100 & FTSE CSDI

The FTSE 100 (together with its very close ‘cousin’ the FTSE CSDI) unsurprisingly remains as the most utilised underlying in the UK market, accounting for over 70% of total issuance in Q3. The mainstay structure in the UK retail market continues its stronghold, the capital at risk FTSE* autocall – making up over 40% of issuance in Q3.

The majority of capital at risk plans had maximum terms of five or six years, this is also the case for autocalls. We did see a couple plans with a maximum term of just three years – something not seen in the sector since 2020 and then 2014 before that. Whilst we would tend to opt for a greater maximum term for autocalls, allowing more opportunity for positive maturities, those with lower maximum terms have often been in the form of step-down or more defensive contracts, therefore allowing the underlying to fall over the term and still generate a positive outcome.

 

 

Source: StructuredProductReview.com

Structured investments put capital at risk.