SPA Conference: Global sales of structured products should rebound in 2013, data provider says

By Emma Trincal

New York, March 6 - Assets invested in retail structured products globally remained flat over the past year at $2.3 trillion - but still equaled that of the hedge fund industry, according to Joe Burris, head of Americas for StructuredRetailProducts.com.

Kicking off the SPA-2013 Annual Structured Products Distribution Conference, which featured 50 speakers, Burris his firm's 2013 forecast for 2013 and looked at the past year's trends.

The total for assets under management includes registered notes and market-linked CDs, and is as of Feb. 8.

Europe remains the largest region globally with 44% of the market, followed by Asia at 35% and the Americas with 21%.

2012 decline

Global sales of retail structured products fell by 18% last year from $345 billion in 2011. The factors behind the decline were a "weak economic environment", "less trading activity", the "cost of funding," but "really, it's the pricing environment," said Burris.

Gross sales in Europe last year dropped by 27% to $108 billion. While France, Italy and Spain were the laggards, Belgium and Portugal enjoyed some growth.

In the Americas, sales fell by 6% to $68 billion. In the United States only, sales were down 12% while Canada was up 9%.

In Asia, gross sales were down 3% to $69 billion with South Korean and Japan being the main drivers.

Trends and forecast

Several key elements can affect market trends, according to Burris.

The first one is investor confidence. Credit concerns and risk aversion play an essential role in decision making, he said, noting, however, that since the summer of last year, investors have been willing to take more risk.

Mentalities by regions also have an impact. For instance, Europeans are traditionally more risk-adverse although "the economic environment has forced them out of their comfort zone." In contrast, Asian investors are more comfortable with risk in general.

Investors are putting more capital at risk, he noted, saying that capital-at-risk structures, which accounted for 51% of global sale in 2011 were 58% of the total last year.

Equity-linked notes still dominate the playing field with 62% of global sales. Burris noted the growth of proprietary indexing notes as a structuring trend and the growing role of e-distribution from a sales standpoint.

Despite last year's decline, Burris had an "optimistic" forecast for 2013, expecting global sales to rise by 4% to $294 billion. Sales in the Americas should increase by 6% to $72 billon, he said.

Among the main challenges faced by the industry, Burris mentioned the need to "deal successfully" with the regulators; creating efficient, transparent delivery processes; putting an emphasis on "cross asset" product development; addressing issues pertaining to credit quality; and finally improving education.

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