Noble Investments has launched its Sapphire Notes series of structured notes advised by Chicago-based HFR Asset Management and is promoting them through a series of private banks, independent advisors and consumer banks in Hong Kong, Taiwan and Singapore, as well as Europe.
This follows two similar notes, also advised by HFR, sold last year to high-net worth investors in Taiwan, Singapore and Japan.
"Banks in markets such as Taiwan say more than 50% of their fund sales are in the form of notes," says Stewart Aldcroft, regional director at Noble in Hong Kong. "Mutual funds are seeing a decline in sales globally because of the uptick in sales of notes."
He would not be drawn on revealing the firm's asset target: "Billions and billions," he says.
Noble is also working with regional banks to white-label similar products for them, tailored to meet those institutions' perceived market needs. "Banks know there's a lot of demand for notes but they don't always realize just how much, or they lack the confidence to provide these themselves," Aldcroft says. "They may want to work with us, perhaps as a prelude to learning how to structure these notes in-house."
The Sapphire range comes in three tranches, with the shortest maturity, an eight-year note, denominated in US dollars to attract Asian investors. "That's the shortest we could make it," Aldcroft says. The other tranches are a 9.5-year note denominated in euros and a 11-year note denominated in Swiss francs, which should appeal more to the European investor base.
The notes target an annual return of 11-12% with 8-10% anticipated volatility, and offer daily liquidity based on weekly valuations. 100% of the principal is protected by Barclays Bank, and parts of the performance may be locked in to enhance that principal protection.
HFR will allocate assets to a portfolio of hedge funds of various strategies. This new series differs from previous ones by including an allocation of around 30% to managed futures (CTAs). It is also the first time Noble has marketed notes to Hong Kong investors.