Former top equity structurer at Barclays to lead product development at Advisors Asset Management

By Emma Trincal

New York, March 21 - Samson Koo, the former head of U.S. equities derivative structuring at Barclays Capital, recently joined a large distribution firm to spearhead innovation in the structuring of products.

One of his new roles as head of derivative products at broker-dealer firm Advisors Asset Management, Inc. will be to achieve convergence between 1940 Act products and structured notes, Koo told Prospect News.

1940 Act products are fund-like investments that also offer some of the attributes of a structured product. They include most fund companies, such as mutual, exchange-traded and closed-end funds, and also unit investment trusts.

A UIT is an investment company offering a fixed portfolio of securities having a definite life.

Convergence

"AAM works in many different areas. It's a financial solutions partner to broker-dealers and financial advisers. The two areas where I will be the most closely involved are structured products, of course, and [UITs]," Koo told Prospect News.

"The convergence between 1940 Act products, such as UITs, and structured products is a big idea and a very promising area," he said.

UITs first

Koo said that his effort to create convergence will first focus on UITs, because it is "a market in which AAM has a big presence."

The firm last year sold over $1 billion of structured products and about $3 billion of UITs, he said.

"We want to be able to offer the attributes of a structured product into the platform of a UIT. A big part of my new role at AAM is to engineer such new securities. We're very close to offering such products," he said.

He defined the type of new securities he is working on creating.

"We're talking about a UIT that has the legal form of a 1940 Act instrument but that uses derivatives in order to deliver some of the attributes a structured product can offer," he said.

"There are many features that can be offered by a structured product. So far, UITs generally don't offer these features. But if you design a UIT properly, you can get a product that would deliver these features. That's the idea.

"For instance, a lot of structured products have principal protection. Equity-based UITs generally don't. When structured properly, the UIT, with the help of the derivatives technology, can deliver features such as principal protection, for instance."

Challenges

Koo described his task as an ambitious endeavor.

"My goal is to achieve the convergence between 1940 Act products and structured products. There have been several attempts in this area, but there is a combination of obstacles related to new regulations, market conditions, interest rates or volatility. It's a complex project. Offering most of the features of a structured product in a UIT format is not easy.

"It's not easy, but we feel we can do it.

"There are challenges, but there's also a lot of potential, a great deal of opportunities and we think we can meet those challenges."

Protection first

"We feel we're very close to offering this product. Legally it would be a UIT. But it would offer several of the features of a structured product," he said.

Koo said that market conditions and demand will dictate his team's priorities.

"We'll focus first on what we think the market is most interested in doing.

"We have principal protection in mind, and that's what we're focusing on right now - at least for our first product.

"That's because there is a strong demand for principal protection, but market conditions make the structuring of those products very difficult. It's hard to price a principal-protected product in a low-interest-rate environment. So that's part of the puzzle we need to solve right now."

Partnering with banks

Koo said that he will also utilize his relationships with banks to improve the structuring of products in general.

"I am a structurer. I am looking to play a role in the design of the product. It's a two-way street. A product is not always the idea the issuer has. We have our own ideas. We will work with the issuers to try to come up with more attractive structured products."

As a distributor, Koo said that he is well positioned to understand the needs of investors and advisers alike.

"I work with AAM, a large distribution firm. I can be one step closer to the ultimate investor than the issuer of the structured product. This proximity to the market helps me work with the issuer. As distributors, we believe we have a good idea of the investor's demand.

From Barclays to AAM

Koo explained why he made the move from Barclays to the distribution firm.

"I was head of the equities derivative structuring at Barclays in the U.S. For me, it was a good experience. I got to know AAM, and they got to know me. The timing is right for me to start working on the distribution side. AAM is one of the top distributors of financial products," he said.

"As a structurer, I have an understanding of how structured products are designed and I have the connections with the investment banks. I bring to the table an understanding of the use of derivatives as well as those relationships."

Koo has more than 20 years of experience working in the derivatives/structured products business, beginning with Bankers Trust in New York, followed by overseas posts in Tokyo and Hong Kong and then in New York with JPMorgan, according to his biography. He joined Barclays in 2005.

AAM offers access to the fixed-income markets, as well as portfolio analytics, UITs, ETFs, structured products, separately managed accounts and alternative investments. The firm has 10 offices in the U.S. and partners with more than 90 broker-dealers and over 35,000 financial professionals.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.