Exchange Traded Products (ETPs) open the door to a wide range of investment classes. The spectrum of these passive financial products includes raw materials, bonds and currencies alongside entire equity markets, sectors and regions. Structurally an ETP is a debt instrument in the form of a securitised bearer bond. To reduce the issuer risk, ETPs are secured by the depositing of a pledge, known as the collateral. As well as securities, this can take the form of precious metals or deposit money. Combined with liquid and transparent stock market trading, the flexible possibilities have led to the increasing availability of such products, with the number of ETPs quoted on the SIX Swiss Exchange passing the 100 mark for the first time last year. There are now more than 180 vehicles of this kind on the list of stocks. While the segment was initially dominated by raw materials, cryptocurrencies are now the drivers of growth – a particularly large number of ETPs track a digital means of payment such as Bitcoin, for instance.
Leonteq, the Zurich-based fintech company, is now engaged in refining this market both structurally and also with regard to the universe of underlying assets by bringing the ETP+ label into being. At the core of this innovation is improved protection for investors. To date many ETP issuers have been special-purpose vehicles with no rating and under no regulatory supervision. What is more, these providers are frequently backed by only the bare minimum of financial resources. Leonteq, by contrast, comes with an equity base of around CHFmn 930, while it also offers a 15-year track record as a successful issuer of structured products. As the first ETP provider in Switzerland, the company is licensed and monitored as a securities firm by FINMA and enjoys an investment grade rating from the agency Fitch.
A second advantage of ETP+ lies in the type of collateralisation. Here Leonteq is cooperating with the SIX Group, with a pledge being deposited with SIX SIS AG for every product. The depositary agent ensures that investors have access to these funds in the event of the issuer becoming insolvent. Measures are also taken to ensure that the collateral is sufficiently large: SIX Repo AG undertakes a daily review and valuation of the securities. The system just outlined is not new – in fact, banks, insurers and pension funds have been using the interplay of depositary (SIX SIS AG) and collateral agent (SIX Repo AG) in a collateral management service offered by SIX since as long ago as 2012.
The very first ETP+ is also innovative when it comes to the underlying asset, as the investment product tracks the FuW Swiss 50 Index. This is as yet the only ETP listed on the SIX which offers access to equities as an asset class. The idea and concept behind the underlying come from FuW, the editorial team behind the respected financial publication having developed the FuW Swiss 50 Index in the first place. As the name suggests, the benchmark contains the 50 largest listed companies in Switzerland. That makes it representative of the diversity and quality of the domestic equity market. The index is reviewed and, where necessary, adjusted every six months. Alongside certain minimum requirements on share liquidity, a freely fungible market capitalisation is an essential criterion for selection.
The 25 largest components are double weighted, the remaining 25 single weighted. This ensures that the index has a broader diversification compared with a benchmark determined purely on the basis of market value. At any rate, the FuW Swiss 50 Index is a veritable “who’s who” of the Swiss economy. This applies for the absolute heavyweights Nestlé, Novartis and Roche just as much as for leading companies from the second tier of the market. The mid-cap spectrum, for instance, is represented by Galenica, Georg Fischer and Kühne & Nagel. Since the underlying asset is a net total return (NTR) index, holders of the ETP+ also share in the dividends of the companies tracked. The net distributions are reinvested automatically. This full, flexible and time-unlimited participation in the Swiss equity market with the aid of an innovative and particularly secure product structure comes at an annual fee of just 0.72%.
We look forward to answering all of your questions about our products and how they are traded. Please don't hesitate to get in touch! Phone: 058 800 11 11, email info@leonteq.com or contact us here.
