Bank targets investors with open-ended certificates
ABN Amro believes that retail- and private-banking clients in Asia will become major users.
ABN Amro is bolstering its platform for open-ended certificates in Asia. It along with Deutsche Bank is the leading provider of such products in the region, and ABN sales executives reckon certificates could one day outpace investor interest in exchange-traded funds.
Miles Ashton, head of sales in Asia for private investor products at ABN Amro, says the bankÆs product platform has mushroomed from 4,500 items, including open-ended certificates, at the beginning of the year to over 10,000.
These are relatively simple products, popular in continental Europe, that give investors access to niche products that would otherwise require opening a margin account with a broker. These æaccess productsÆ replicate an asset class or a benchmark, from an equity index to commodities, by replicating it on a one-for-one basis. That is, the broker will buy every stock in an index; there is no optimisation as can occur with an ETF. The broker then buys a futures contract to hedge its position. It makes money off the bid/offer spread in the underlying assets, and on the turnover of these certificates.
Unlike, say, the guaranteed funds that were all the rage in Asia two years ago, these certificates donÆt have any optionality; there is no investment of the principal into zero-coupon bonds. An investorÆs risk is the same as direct exposure to the asset class. Banks offer clients daily liquidity.
ôInvestors in Asia like flow-type products,ö says Ashton, who moved to Hong Kong in January after eight years with ABN Amro in London. ôThere arenÆt any 10-year capital guaranteed products like you have in Europe. Here itÆs more like six months. We think the certificate platform is a nice fit û itÆs liquid, easily traded and thereÆs no maturity date.ö
He adds the bank is churning out themed investments for these products, such as a water play that invests in stocks in water infrastructure, treatment and supply stocks, based on an index calculated by Standard & PoorÆs.
Although many of these certificates are listed on exchanges in Europe, ABN Amro is marketing these through consumer and private banks in Hong Kong, Singapore, Taiwan and Southeast Asia. The firmÆs platform does not extend to Japan.
Miles Ashton, head of sales in Asia for private investor products at ABN Amro, says the bankÆs product platform has mushroomed from 4,500 items, including open-ended certificates, at the beginning of the year to over 10,000.
These are relatively simple products, popular in continental Europe, that give investors access to niche products that would otherwise require opening a margin account with a broker. These æaccess productsÆ replicate an asset class or a benchmark, from an equity index to commodities, by replicating it on a one-for-one basis. That is, the broker will buy every stock in an index; there is no optimisation as can occur with an ETF. The broker then buys a futures contract to hedge its position. It makes money off the bid/offer spread in the underlying assets, and on the turnover of these certificates.
Unlike, say, the guaranteed funds that were all the rage in Asia two years ago, these certificates donÆt have any optionality; there is no investment of the principal into zero-coupon bonds. An investorÆs risk is the same as direct exposure to the asset class. Banks offer clients daily liquidity.
ôInvestors in Asia like flow-type products,ö says Ashton, who moved to Hong Kong in January after eight years with ABN Amro in London. ôThere arenÆt any 10-year capital guaranteed products like you have in Europe. Here itÆs more like six months. We think the certificate platform is a nice fit û itÆs liquid, easily traded and thereÆs no maturity date.ö
He adds the bank is churning out themed investments for these products, such as a water play that invests in stocks in water infrastructure, treatment and supply stocks, based on an index calculated by Standard & PoorÆs.
Although many of these certificates are listed on exchanges in Europe, ABN Amro is marketing these through consumer and private banks in Hong Kong, Singapore, Taiwan and Southeast Asia. The firmÆs platform does not extend to Japan.
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