A glance at Vontobel Group's 2006 half-year report makes for interesting reading, especially if you happen to be involved with the structured products markets. In the first half of 2006 the bank reported SFr123.8 million generated from issuing and market-making with derivatives and structured products. This represents an impressive 82% increase compared to the first six months of 2005 and 18% compared to the second half of 2005.
But we are not honouring Vontobel for its impressive sales figures alone; rather we are recognising the Swiss bank's steadfast commitment to structured products. Not only has it grown its market share, the bank has been at the forefront of driving industry developments, such as the Swiss structured products association - Schweizerischer Verband fur strukturierte Produkte (SSVP). And the sheer array of products offered by Vontobel makes the bank the envy of competitors in Switzerland and elsewhere.
When it comes to innovation, Vontobel is widely regarded as the leading issuer in the Swiss market for leverage products and investment certificates. And market share figures certainly back this up.
For a start, Vontobel holds the largest market share according to premium turnover in Swiss Exchange-listed warrants and certificates, holding 32.95% of the market as at the end of August 2006, according to a Derivatepartners report. Its closest rival holds just 16.66%. Even more impressively, Vontobel commands a 42.7% share of the leverage products market in terms of traded volume, again according to Derivatepartners, with its biggest competitor taking a 22.76% slice. When it comes to investment certificates, Vontobel is the clear leader with a 22.84% share, the same source calculates.
"It certainly helps Vontobel that our board of directors is supportive," says Georg von Wattenwyl, Zurich-based head of advisory and execution derivatives. Indeed, in September, Roger Studer became a member of the extended executive board of Bank Vontobel. Studer has been with the bank since 2000, recently serving as head of the Financial Markets division, which comprises the derivatives and trading business. "Naming Roger as a board director really underscored the strategic importance of this business for the bank," von Wattenwyl says.
Importantly, Studer is also the face of the first industry association for structured products in Switzerland. In April, five Swiss-based banks launched the SSVP in an effort to increase understanding and acceptance of structured products. And these banks aren't fringe players with a need to boost an ailing market or self-promote a mediocre business; these are hard-hitting names in the Swiss market, namely ABN Amro, Credit Suisse, UBS, Vontobel and Zurcher Kantonalbank. Von Wattenwyl says the association has been well supported and that regulatory and best-practice themes have dominated proceedings so far.
Promoting structured products
In addition to working with the wider market, Vontobel has also led the way when it comes to promoting the benefits of structured products to its own clients and financial intermediaries (where between 85% and 90% of the bank's products are placed). The bank's website, www.derinet.ch, for example, includes detailed product descriptions and regularly updated news. "Educating the market about derivatives-based investments is a key focus for us," von Wattenwyl says.
And one way of aiding market understanding is to keep things simple, he adds. "Our approach is to first identify client needs and then to offer appropriate investment solutions. Our advisory and execution team is strongly integrated with the financial engineering and trading departments to fully exploit insights," he says. What's more, Vontobel is unusual in the fact that it offers branded investments which can straddle asset classes - something investors are likely to appreciate.
The bank's Sprinter Warrants range, for example, consists of exotic options that are "only marginally influenced by volatility or time market, making the product transparent," von Wattenwyl says. Such investments expire worthless if the price of the underlying touches the knock-out price.
Defender Vonti products, meanwhile, offer coupon payments. If, on the expiry date, the price of the underlying asset is the same as or higher than the exercise price investors are repaid their capital at par. If the price of the underlying asset is lower than the exercise price, the capital repayment is based on that lower price and the coupon, in any event, is paid out.
Of course, Vontobel is also active in the bespoke market. But here we honour the bank for its hugely successful retail business which offers a wide variety of products and promotes investor education.
WHY VONTOBEL WON
Vontobel is a colossus of the Swiss structured products market. Its wide range of products, renowned financial engineering expertise and commitment to furthering the development of the market can all be applauded.
The week on Risk.net, March 10-16 2018Receive this by email