BNP Paribas
|
Also shortlisted in this category: |
Judging by the number of banks that pitched for this award and the number of bankers present at the pitch meetings (an average of six), structured products is clearly a field in which many investment banks have ambitions.
Among the many candidates, Deutsche Bank and Société Générale have great reputations but failed to shine as much as shortlisted Barclays Capital, which stood out more for a number of innovations, particularly in commodities, and UBS for its surprisingly impressive and under-appreciated skills.
BNP Paribas, however, continues to stand above the rest for its strength across asset classes, and deserves recognition as the best structured products house for the second consecutive year.
An integral part of the bank’s success has been its approach to its clients and its ability to adapt products across asset classes, a skill that almost every bank claims but which BNP Paribas can demonstrate.
|
Patrik Sandin: adapting techniques from one market to the next |
 |
“We try to encourage clients to show us their portfolios so that we can tailor solutions for them,” says Patrik Sandin, global head of structuring at BNP Paribas. “What really sets us apart is our strength across asset classes. A lot of houses are strong in equities or credit or foreign exchange but few are strong in all. We pride ourselves on our ability to adapt techniques used in one market to others. For example, we have taken the concept of efficient frontiers from asset liability management and applied it extensively to equities.”
The French bank has an enviable reputation for introducing some of the most popular structured products and has been a leader in creating notes that replicate and democratize hedge fund strategies.
BNP Paribas was the first bank to bring correlation trading to a wide non-hedge fund audience last year with the launch of its Talisman dispersion products, which measure the tendency of the performance of a group of instruments to deviate from their average. Having traded an aggregated notional of €475 million of the Talisman product linked to equities in 2006, the bank broadened the product range in January 2007 to the fixed income markets to take advantage of low volatility, the flatness of yield curves and increasing correlation in interest rates and foreign exchange.
Volatility trading, once a strategy only used by hedge funds, has taken off over the past 12 months and BNP Paribas has led the market in volatility swaps, claiming a market share of 50%.
The bank’s Diva Index, which plays on the outperformance of the Eurostoxx Select Dividend 30 Index of high-yielding stocks and the broader DJ Eurostoxx 50 index, sold widely in France, the Middle East and Italy, where the product was widely copied. Almost €2 billion of Diva and Diva-imitation products were sold in Italy alone last year.
One of the bank’s most successful products over the past 12 months has been its Dragon swaps. The US dollar/HK dollar swap, which enables the investor to receive an attractive combination of fixed/floating coupons on a quarterly basis against a coupon linked to a strip of fixings, was designed to help clients better manage their currency exposure. Since launching in 2006, BNP Paribas has transacted more than $10 billion of the product in Asia in hedging notional and has successfully translated the original Dragon swap for a number of European and Middle Eastern currencies.
Although innovative products that BNP Paribas introduced in previous years, such as longevity bonds, which help life insurers and pension plans hedge the risk that their clients will live longer than expected, proved their utility by coming back in fashion over the past 12 months, the bank has not rested on its laurels. Rather, the bank has been quick to capture opportunities in new product areas such as property derivatives.
In areas where the bank has been less quick, it has clearly used the time to make sure the products it comes up with are first class. BNP Paribas was certainly not one of the first to launch a commodities index but the DCI BNP Paribas Enhanced Index, which it launched this year in conjunction with commodities investment house Diapason, has proved itself to be one of the best. The highly diversified index has outperformed all rival indices in both contango and backwardated markets by using a roll yield optimization algorithm to search the entire length of the forward curve to find the most cost-effective maturity.
With the launch of its Waypoint multi-maturity CDO, managed by Solent Capital, BNP Paribas has added to its list of innovations in the credit derivatives market. The product, which has already attracted €260 million in 2007, is the first multi-maturity CDO and is well suited to the current spread environment.
In CPPI products, BNP Paribas set the benchmark in 2005 and 2006 with its huge Dynamo and Axiom issues. Its latest version, Azur, which offers exposure to assets across the whole credit spectrum, including ABS, leveraged loans and duration strategies with a dynamic alpha overlay, enhances the importance of the product to the bank, which has already reached the same size as its CDO business.
