If you liked XIV, you’ll love peripheral AT1

Protecting retail investors is a laudable goal. But what they are protected from often seems arbitrary.

  • By Owen Sanderson
  • 08 Feb 2018
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Unfortunate investors that bet big on continued low volatility were this week hit hard, as whipsaw markets blew two products through their liquidation triggers: Credit Suisse’s VelocityShares Daily Inverse VIX ETN (XIV) and Nomura’s S&P Vix Inverse ETN.

It’s not clear who bought either, but there’s every chance that retail buyers got involved, joining a trade that performed exceptionally last year in easy-to-purchase exchange-traded format.

In the bond markets, it’s a different picture. Regulators have been straining every nerve to keep bank capital out of retail hands, and, following the advent of MiFID product governance rules this January, it’s only governments and a few agencies that are willing to sell to retail.

Volatility products, despite being a derivative on a derivative on an index, do have a simpler pay-off than an AT1 issue. Navigating reset spreads, maximum distributable amounts, available distributable items, P2G and P2R, and SREP is beyond the skills of plenty of professional money managers, let alone mere citizens.

But perhaps that doesn't matter. The belief that professional investors only buy securities they understand is obvious bunk, and yet seems to be an article of regulatory faith.

Retail investors who buy stuff like XIV are happy to speculate on all manner of markets, including bank capital — and they’re often wealthier than the regular Joes whose pensions are ploughed into institutional funds.

Where they do need protection is from marketing. Structured notes and bank capital alike have been placed as “savings instruments” in the past — leading to lawsuits and tragedies.

That’s wrong. Both products, and much else in the capital markets, ought to be considered speculative. Make that clear at the outset, then let retail investors take their own risks.

  • By Owen Sanderson
  • 08 Feb 2018

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Citi 66,188.03 223 8.88%
2 JPMorgan 54,703.62 214 7.34%
3 Bank of America Merrill Lynch 48,042.32 157 6.45%
4 Barclays 43,518.03 123 5.84%
5 Goldman Sachs 39,790.19 103 5.34%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Deutsche Bank 9,317.17 12 13.67%
2 SG Corporate & Investment Banking 7,508.63 11 11.02%
3 Goldman Sachs 5,773.27 11 8.47%
4 Citi 4,606.54 14 6.76%
5 BNP Paribas 2,914.62 14 4.28%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Goldman Sachs 2,432.15 11 12.88%
2 Credit Suisse 1,641.59 6 8.69%
3 JPMorgan 1,527.50 8 8.09%
4 Deutsche Bank 1,424.25 10 7.54%
5 Citi 1,285.41 7 6.81%