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The Asia team will leverage Rabobank's fund derivatives platform in London, which has been growing at a clip since its launch in 2001 and now has Ç2 billion in notional assets outstanding. Donal Galvin, Asia head of global financial markets, is hoping to repeat that success.
"It's fair to say that if the business grows in Asia like it has in London, it's going to be huge," he says. "I expect we could see $500 million to $1 billion of deals in the first year and I don't see why we can't grow from there."
The market for structured products linked to funds is driven by the recent hedge fund boom. While many institutional investors like the returns they think they can get from investing in such funds, they are either cautious about making a first investment in this asset class or are restricted from doing so.
Adding some structure on top of a fund of hedge funds can help fix both problems. The most popular products give investors insurance against losses while retaining some of the upside û the so-called alpha. "That's what structured products do," says Wu. "They give investors the risk/return profile that suits their needs."
The core of Rabobank's fund derivatives expertise will stay in London. Most of the fund managers that these products are buying into are based in Europe or the US, and Asian investors have similar demands to their counterparts in Europe, which means that a lot of the legwork already being done in London can also be used to create products for the Asian market.
However, Wu says that he also hopes to be able to create products built around Asian funds that Rabobank can sell back into Europe. "There are a lot of good managers out here," he says.
Principal protection plays a big part in giving conservative investors the comfort to buy into the hedge fund mania, but the quality of the bank providing the guarantee is an important element too.
This is a big kicker for Rabobank, which is triple-A rated and ranked as one of the safest banks in the world. "People are buying these products for seven or eight years," says Galvin. "They want to be sure the counterparty is going to be around that long. We're triple-A rated and we're happy to underwrite all the basis and structuring risk involved in a deal."
In London, Rabobank's fund derivatives team is also structuring leveraged and pass-through products. The pass-through structure uses derivatives to mimic the returns of a fund û useful for accessing restricted markets û whereas leveraged trades can boost the returns of the underlying fund or funds. Principal protection, however, remains the biggest part of the market.
The AU$85 billion ($61.6 billion) Australian super fund has some exposure to indebted property developer Evergrande. Meanwhile, China’s construction finance is part of its core strategy in real estate.
Investors are seeing the risks, but also the opportunities of the logistics sector. Warehousing their fears for the moment, they can see it's a good conduit to high-growth assets.
Insto roundup: GPIF staff say J-Reits more attractive than traditional assets; Hong Kong's strict Spac criteria
EISS Super hit by another scandal; China's CSRC launches consultation on disclosure requirements for new BSE securities; Hong Kong issues consultation paper on Spacs; New World Development partners with China Taiping to focus on Greater Bay Area projects; GPIF employees say Japanese Reits have grown more attractive; Taiwan's BLF invites bid for $1.7 billion mandate; and more
SGX’s new framework for Spacs will likely provide investors with a much-needed channel for direct deals, but the verdict is still out on whether it will bring liquidity to the bourse.