Retail structurer of the year: BNP Paribas

A global giant in the structured products space, BNP Paribas has hitherto been seen as a smaller player in the Americas’ markets. 2014 changed that.

Frank Bertoneche, BNP Paribas structured products

A giant of the global structured products market, BNP Paribas has historically lagged behind some of its rivals in the Americas. A string of deals in 2014 with some of the largest content providers in the US market has put paid to that idea, however, with those targeting retail investors being the engine for growth.

The metrics are beginning to stack up. According to the most recent survey of the US structured products market by Greenwich Associates, BNP Paribas' share of the retail market grew faster than any other house in 2014. Its market penetration score of 45% puts it within touching distance of more established US market leaders.

"Over the past couple of years, we've initiated a five-year thought process. The questions we asked ourselves were: what do we want to give retail investors and how do we want to deliver it? We decided very early on that we're more interested in building market share across all products rather than grabbing, say, 20% of a particular demographic. We're not chasing quick wins; we're here for the long haul," says Franck Bertoneche, head of cross-asset distribution, North America at BNP Paribas in New York.

One of the key strategic decisions taken by the bank during this period was to build partnerships with existing investment content providers, many of which lack a direct route into the structured products market. Last year, the bank partnered on key deals with the likes of Dorsey Wright & Associates - the quantitative research-focused shop that sold itself to exchange giant Nasdaq for $225 million at the turn of the year - retirement solutions provider Security Benefit and independent index provider Solactive.

The strategy appears to be a sound one: volumes for US retail structured products among third-party distributors jumped by over 50% during 2014, despite a relatively flat year for the market as a whole.

We're not chasing quick wins; we're here for the long haul

Rarely has there been a better time to work with independent advisers, argues Bertoneche. With Wall Street downsizing dramatically, the depth of talent flocking to small firms is growing all the time. BNP Paribas sees its mission as turning those ideas into products that make sense to retail investors.

The Dorsey Wright deal, for instance, saw the bank issue seven-year, market-linked certificates of deposit (MLCDs) tied to one of the firm's proprietary, price-driven smart beta indexes - the DWA Large Cap Sector Rotation Target Volatility 7 Index.

"We like to think of ourselves as a content shop, not a product shop. Partnering third-party content providers in order to better service end-users is something we're very focused on doing. Unlike most of our peers, we're not singularly focused on selling our own products," says Bertoneche.

In April, eyeing the buoyant US market for socially responsible investments, BNP Paribas saw the opportunity to introduce products tied to the World Bank's mammoth green bond issue - products it launched in Europe and Asia at the end of 2014 - to US investors. The bank offered them the chance to invest in 10-year senior unsecured and unsubordinated notes, issued by the International Bank for Reconstruction and Development, linked to the performance of the Ethical Europe Equity Index - a benchmark composed of companies ranked as highly socially responsible by Solactive.

"Successfully bringing the green bond deal to the States was a great achievement, not least because it was a chance to bring new investors into a major issuance programme. Some investors in the US may still have preconceived ideas about what they're getting from a structured product, but I think deals like this help to change that perception," says Bertoneche.

BNP Paribas also increased its presence in the US fixed annuities market, winning a competitive tender in April 2014 to partner Security Benefit, which saw the savings and retirement giant include the bank's High Dividend Plus Index as a crediting option in its overall value annuity product.

"We have a wealth of experience in smart beta index construction; we offer something like 3,000 different indexes globally. The value proposition for Security Benefit was to have something smart, but simple, that is relevant to advisers. We established a very close relationship with them, because we were able to involve them in the design and structuring of the index," Bertoneche adds.