Deutsche Bank plans to start offering capital guaranteed products on baskets of hedge funds. Johan Groothaert, head of equity derivatives structured products in London, said it has decided to offer these products in response to demand from insurance companies and high-net-worth individuals for principal-protected exposure to hedge funds. It will offer principal protected notes on single hedge funds, baskets of hedge funds managed by Deutsche Asset Management and third party baskets of funds.
Groothaert excepts that Deutsche Bank is late in offering these products, especially compared to the French banks
(DW, 1/21). But he thinks the firm's more conservative approach will yield rewards for its clients in terms of lower risks and lower premiums. Groothaert said it is essential for the bank to have a hand in the risk management of the underlying funds. He added that the firm does not plan to interfere in the directional investment of the hedge funds but would want to be able to stress test the selected funds' positions to measure risks, such as the correlation of investments, in the event of a market crash.
To spearhead the effort, Deutsche Bank in July hired Jean-Marie Barreau, managing director in equity derivatives sales at SG Cowen in San Francisco, as managing director and head of structured products on managed assets in London. Barreau said he joined Deutsche Bank because he did not feel SG was fully behind the effort. Officials at SG did not return calls. Since his departure SG has shelved plans for launching an equity derivatives office in San Francisco (DW, 7/16).
Groothaert said Deutsche Bank plans to hire at least another 10 marketers and structurers for the structured products group in London. But he added it will wait until next year to make the hires, because of the cost of paying a year's bonus to a new recruit even though they will have only been at the firm a couple of months.
