Macquarie may be one of the iconic Australian brands, but it has developed innovative distribution solutions for markets throughout Asia - markets with vastly differing client demands and servicing requirements.
In Australia, Macquarie has seen growth in the distribution of capital-protected products to private bank and retail clients, says Jeff Weeden, executive director of the equity markets group at Macquarie in Sydney. "There's a lot of money in the system, and many people are looking to invest," he says. "More Australians are making investments offshore and many investors are borrowing to invest, making capital protection attractive. Market volatility since July has increased as well, which has made people more interested in capital-protected structures."
Weeden points to the continued success of the bank's Fusion and reFleXion funds as examples of this trend. The Fusion series is in its fifth year, and in its October 2007 iteration offered exposure to 22 managed funds, both domestic and international, with the ability to borrow with a 100% guarantee of initial investment at maturity. ReFleXion's October 2007 offering detailed exposure to nine trusts built on underlying investments in the Nikkei 225 Index, the Merrill Lynch Japan Focus 1 Index, best performers in the S&P/ASX 200 Index, the Morgan Stanley SICAV Asian Property Fund, the Macquarie-Globalis Bric Advantage Fund, the Merrill Lynch China Dragon Index, the DJ Eurostoxx 50 Index, the Merrill Lynch Renewable Energy Index and the Wellington Commodities Fund.
Macquarie also successfully launched another new structured product platform in 2007, MQ Gateway, targeting high-net-worth individuals and the increasing number of self-managed superannuation funds, says Weeden. Gateway offers access to a number of research-backed strategies that can be invested singly or in conjunction with each other. The product is available with and without gearing, and is also capital-protected at maturity. MQ Gateway was developed off the back of the strong volumes achieved in the wholesale space via the CMI platform, where the minimum investment is A$500,000.
Outside of Australia, Macquarie maintains sales teams in Hong Kong, Singapore, Japan and South Korea. The bank was recently granted a licence in Korea which enables it to be the first foreign issuer of warrants in that country, says Justin Crawford, division director and head of sales in Asia for Macquarie.
On the flow sales side, Macquarie has concentrated on adding variations to the well-accepted and widely-used accumulators. "People have been very focused on growth and income equity-linked products," says Crawford. "We found that people have gone into these products with the anticipation of accumulating shares at a discount for a sustained period. However, with the upward-trending market, a lot of these trades have knocked out in a very short space of time, even on the first day. That causes a bit of frustration to the clients, as although they do accumulate shares at the discount, they are only receiving a day's worth of shares. Therefore one of the variations we have been implementing is monthly guarantees such that, no matter when the knockout occurs in the first month, the client will receive an accumulated amount of shares. Another variation added is delivering the shares in the first month post the knockout on normal securities delivery terms, which mitigates the whole market-timing risk."
The bank is looking to add market neutral or capital protection to these products, and is relying on the strong relationships the sales teams have with their clients to explain the potential benefits, says Crawford.
On the funds side, Macquarie has also developed three open-ended funds to take advantage of IPOs of Chinese companies, with launch points over this year. The first fund, MQ IPO China Concentrated Core Fund, was introduced in March and uses a rotational strategy of buying and harvesting IPO stocks with pure China-related IPOs. The second fund, MQ IPO China Gateway, launched mid-year and invests in exposures to China-related, Hong Kong, Singapore and Taiwan IPOs, predominantly listed in Greater China and Singapore. MQ IPO China Gateway also invests up to 30% of assets in the China Concentrated Core Fund. Last month, Macquarie also launched distributing MQ China New Stars Fund, which focuses on small cap securities with exposure to IPOs and newly-listed small cap securities in "one or more regions in the Greater China and/or Singapore region," according to fund information.
Looking to 2008, the Asian team is developing a structured product that will focus on being able to get exposure to infrastructure, says Crawford.
The proof is in the bottom line - in Macquarie's interim update to the end of September 2007, the bank's Equity Market Group's performance had increased by 130% over the same time period in 2006, with funds under management in MQ funds increasing 55% to A$2.1 billion.
The week in Risk.net, May 19-25 2017Receive this by email