HPC Investment Partners is targeting tier one banks to help them “respond quicker and more efficiently to the needs of investors”, after launching a new set of lifecycle tools in its click-and-trade platform at the end of 2017. SRP spoke to Pierre-Yves Breton, founding partner and Jordan Sfez, managing partner at the French structured products specialist boutique, which was came to life in the UK in late 2015.
As well as pricing and a wide pool of issuer credit risk, investors also treasure access to a diversified pool of underlying assets and payoff profiles, according to
Sfez. “We have developed several tools for clients to access a consolidated existing offering, so, whenever there is a reverse enquiry, we have products and portfolios to show,” said Sfez. “We also have life cycle management tools to enable clients to track their investments and make decisions around their allocations in real time, as well as to see when a coupon is due or if an observation date is approaching or a barrier has been breached,” said Sfez. “Clients really appreciate these notifications because it allows them to be on top of any changes. This also help us to have a regular communication with the issuing banks around early redemption payments and maturities.”
The more sophisticated the investor, the most relevant this kind of tool becomes “because it provides an efficient way to transact and keep track of significant volumes”, according to Sfez. “However, our approach is to start with small tickets, so that we remain within any trading limits banks might have, and we can also show what we offer, and then move to bigger size tickets,” said Sfez. “The platform can carry any of the more standard structures, such as reverse convertibles, autocall, Phoenix and credit-linked notes… once the term sheet and template are ready”.
The platform also enables the white labelling of products that are sold or issued by other providers, so that, “clients can have access to a comprehensive lifecycle management functionality via a consolidation tool”.
Two years after its launch, the company has established is now seeking to expand its coverage of institutional investors, private banks and multi-family offices by launching partnerships with private banks, according to Sfez. “We have done a lot of work in Switzerland, Luxembourg and clients in emerging markets countries over the last year, and we’re hoping this will help to externalise part of the business in the most developed market in the world for structured products,” said Sfez
. Despite a “very tough” compliance environment and the difficulties of setting up distribution, the company has closed more than 30 distribution agreements.
“This is a differentiating factor with our competitors and complements our automated trading offering, pricing tool, and the capacity of our platform to generate product documentation from any issuer,” said
Sfez. “We are trying to leverage our technical and flow management capabilities to connect tier one banks with the platform, and, once the connexion is done, we want to put the right tools in the hands of the sales person, advisor or relationship managers to serve their clients.
“By connecting tier one banks, we can also offer the most competitive pricing and provide optimisation and calibration, before we run a ‘beauty contest’ among issuers,” said Sfez.
“One of the main issues brokers face when dealing with structured products is that, before a trade is completed, they have to go to and fro with the issuer,” said Sfez. “Our platform helps those brokers to make the reverse enquiry process more efficient. This approach also serves the sellside because, from a strategy point of view, it allows us to have visibility and establish strong relationships with manufacturers, as we will usually transact a 25% portion of their overall volume.”