EFG FP outlines structured products strategy for Asia

Setting up a structured-products business in Asia could be seen by some as an unpromising move, given that the recent crisis – and losses on products such as accumulators and minibonds – are still relatively fresh in the memory.

But Zurich-based EFG Financial Products, part of asset-management and private-banking group EFG International, last week celebrated a year in Hong Kong by outlining plans to build a regional business.

After setting up the Hong Kong office in July 2010 and obtaining a securities dealing and advisory licence in the territory in April this year, the firm points to several advantages in its favour. Among other things, it boasts years of experience in structured products, a major focus on product transparency and a parent with a strong balance sheet and thus low counterparty credit risk.

Moreover, Hong Kong is the firm’s most important centre globally after Zurich, said EFG FP chief executive Jan Schoch (pictured below), during a trip to the region last week. That’s despite the fact that the firm has a presence in 10 countries around the world, including newly opened offices in London, Madrid and Paris. 

There’s already a “full-blown set-up” of 15 people in the territory, including compliance, IT, risk-management and structuring staff, as well as sales and marketing capabilities, notes Asia CEO Sven Haefner. And the office has the support of a large team of dedicated quantitative specialists, risk managers and operational staff in Zurich.

EFG FP has also, since it gained the licence, started the process of signing up distribution partners for its products, to add to its own private-banking channel.

The firm’s initial focus in Asia will be on promoting its derivatives and structured-product capabilities and selling them through private banks. It will ultimately branch out further into providing the other two broad parts of its offering: asset management, including quantitative-type strategies and liquidity funds; and pension solutions, whereby it structures products for individual clients. EFG FP does a lot of consulting on and white-labelling of products in all three of its business segments.

The company will offer Asian underlyings as well as European and global exposure. “We have to localise and we believe in having a local model, but with added value,” says Schoch.

Haefner and Schoch stress the importance of having a strong technology platform. Many firm infrastructures have not coped well with the fast growth of investment products, says Schoch. He sees that as a big differentiator for EFG FP, since “you can’t differentiate by payoff or underlying, because every issuer can offer everything”. For example, clients can use the platform to customise their own investments and have full transparency and liquidity on them at all times.

Another selling point for EFG FP is that despite being set up just four years ago, it is already the second biggest issuer of structured products by number of products listed on the Swiss exchange. The firm sold around SFr8 billion ($10.1 billion) in structured products last year, and Switzerland is the biggest structured products market in the world in terms of assets (SFr220 billion).

This is perhaps not surprising, given the experience of the firm’s staff. Haefner, who was hired in March last year to build the Asian business, has spent most of his 18-year career as a structured-products specialist, in roles such as global head of products at ABN Amro’s private investor products division.

Schoch has spent six years at Goldman Sachs in structured products and derivatives, before becoming head of equity, commodity and hybrid derivatives at Lehman Brothers in Zurich. He then went on to become a founding partner of EFG FP and subsequently CEO.