Structured Notes 2013 Year End Review

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Structured Notes 2013 Year End Review

  1. 1. ed ur ct ru s St te No ar Ye 13 20 nd E w ie ev R
  2. 2. 01.09.14 www.bloombergbriefs.com Bloomberg Brief | Structured Notes 2 year in review By Richard Bedard The story of 2013 that had the biggest impact can’t be pinned to a time, place or person. Rather, it was the steady and seemingly inexorable rise in major stock markets around the globe. Plenty of structured note investors gladly went along for the ride: They bought one-year autocallables tied to everything from U.S. Steel Corp. to Lululemon Athletica Inc., 20year securities that pay monthly coupons if major stock indexes don’t plummet, and a variety of other products. The stock gains helped take the sting out of other not-so-favorable trends. Interest rates began the year near record lows. Volatility was subdued, with the VIX Index in 2013 about 50 percent below its long-term average. Bank risk improved, reducing funding costs. Thus issuers found themselves squeezed in trying to create alluring terms on notes, whether in coupons or buffers or leveraged gains. They still found ways to wring out yield, such as by pushing out maturities. About 5 percent of U.S. equity-tied notes had maturities of 10 years or longer, compared with less than 2 percent in 2012. Banks also turned to selling notes that tracked baskets of stocks, with returns based on the worst performer. By July, issuance of such “worst of” securities had almost doubled from the year before. Apart from equity-tied notes, the issuance picture was generally grim. Ratelinked sales dropped — who wanted to get caught on the wrong side of the Fed’s eventual withdrawal from monetary easing? Commodity-tied notes fared badly, as the price of grains and precious metals tumbled. Globally, there were also declines in the volume of securities linked to credit and inflation. Beyond the ebb and flow of sales numbers, regulatory issues again weighed on the industry. In the U.S., banks complied Contents OUTLOOK Industry executives share their opinions on 2013’s biggest story and try to predict what’s in store this year. Page 3 top 10 stories A look at the 10 biggest stories that appeared on the newsletter’s front pages last year. Page 4 asset class breakdown While other note categories lost market share, investors couldn’t seem to get enough securities linked to stocks. Page 5 top 10 notes The year’s largest notes were tied to Libor, constant-maturity swaps and the Dow Jones with the Securities and Exchange Commission’s request that they begin disclosing the initial value of their securities. That allowed investors, for the first time ever, to see exactly what that $1,000 note they just bought was worth at the moment it changed hands. In Europe, regulators considered similar measures, as they also pushed for greater transparency. The International Organization of Securities Commissions published a report in April containing proposals that aimed to improve sales practices and disclosures. In the end, some banks decided issuing structured notes wasn’t worth it. Rabobank Groep closed its equity derivatives unit in March and Royal Bank of Scotland Group Plc announced in June it was shuttering its structured products business. Bloomberg Brief Structured Notes Industrial Average. Page 5 monthly sales trends While global sales dropped to the lowest in a decade, in the U.S., equity-linked volume pushed last year’s issuance above 2012’s. Page 6 noteworthy images What would a structured note prospectus look like, distilled to one image? Take a look. Page 7 Quiz Six structured notes, with four different valuations for each. Can you guess which is correct? Page 7 top 100 U.S. note holders The 100-biggest holders of the largest structured notes that have been issued in the U.S. since 2010. Page 8 a closer look at holders An in-depth look at who holds the U.S. structured notes in our sample and which underlyings and maturities they prefer. Page 9 rankings by asset class Our tables rank issuers in Europe and the U.S., showing who climbed a few rungs from 2012 and who dropped a few. Pages 10, 11 A GUIDE TO OUR DATA * U.S. notes are securities issued in the U.S. that are registered with the SEC. ** Global notes exclude U.S. securities and also “variable-principal redemption” notes, such as reverse convertibles. *** European notes are issued in Europe and exclude “variable-principal redemption” notes, such as reverse convertibles. Quiz answers from page 7: 1.(a) 2.(d) 3.(a) 4.(c) 5.(b) 6.(d)  1 2 3 4 5 6 7 8 9 10 11  Newsletter Ted Merz Executive Editor tmerz@bloomberg.net 212-617-2309 Bloomberg News Robert Burgess Managing Editor bburgess@bloomberg.net 212-617-2945 Structured Notes Richard Bedard Newsletter Editor rbedard2@bloomberg.net 212-617-8761 Reporters Alastair Marsh amarsh25@bloomberg.net +44-203-525-8767 Kevin Dugan kdugan4@bloomberg.net 212-617-2035 Newsletter Nick Ferris Business Manager nferris2@bloomberg.net 212-617-6975 Advertising Jeff Maniatty jmaniatty@bloomberg.net +1-203-550-2446 Reprints & Lori Husted Permissions lori.husted@theygsgroup.com 717-505-9701 To subscribe via the Bloomberg Terminal type BRIEF <GO> or on the web at www.bloombergbriefs.com. © 2014 Bloomberg LP All rights reserved. . This newsletter and its contents may not be forwarded or redistributed without the prior consent of Bloomberg. Please contact our reprints and permissions group listed above for more information.
  3. 3. 01.09.14 www.bloombergbriefs.com Bloomberg Brief | Structured Notes 3 outlook What was this year’s biggest story? What do you think will be the biggest surprise of 2014? U.S. Serge Troyanovsky, managing director and head of retail distribution in North America BNP Paribas SA A: The biggest story of 2013 is the performance of equity markets. We saw many structured products follow the lead. In addition, we have also seen a change in focus from income-generating structures to more growthoriented. This is reflective of the more bullish outlook on the equity markets. I think that the biggest surprise in 2014 will be investors buying more notes that use bespoke strategies, that come from a research-based basket of equities, or a dynamic index designed to adjust its exposure based on market conditions. Tom Layton, director of structured products Raymond James & Associates Inc. A: The biggest story for our clients has been the shift to a rising interest rate environment. The dramatic interest rate move in May and June caused investors to re-think fixed-income allocations. Our firm has positioned certain structured products as an attractive alternative. It’s tough to say what would be the biggest surprise, but we feel investors have put less attention on credit risk over the past year as equity markets rallied. If rates rise quickly and/or equities pull back, we could see focus quickly shift to mitigating both credit and market-related risk. Mathias Strasser, chief executive officer WallStreetDocs Ltd. A: From an automation perspective, we’ve seen issuers focusing to streamline the offering process. This trend continues to be driven by cost pressures and regulatory requirements. For 2014, I expect further convergence in regulatory requirements between Europe and the United States. I also expect that the fast-growing use of mobile devices will be felt in the structured products space. This will affect the way investors access information about structured products and how deals are marketed. EUROPE Marc El Asmar, global head of sales in cross-asset solutions Societe Generale SA A: 2013 was a good year for structured products, particularly for listed products and credit-linked products. Basically, anything with a coupon was well received. People were looking for yield. Next year the focus will be on rising rates, on when and by how much they will go up. Investors will be looking for products to hedge or take advantage of that. Keep an eye on longevity-based trades [longevity bonds pay a coupon based on “survivorship” of a population group], as we expect see more of that. Shane Edwards, global head of equities structuring UBS AG A: 2013 will be regarded as a great year for equities. Japan was the standout market in terms of returns and international attention. Also interesting: the pronounced outperformance of developed versus emerging market equities. In 2014, we expect a continuation in demand for yield products, but a preference for floating-rate coupons rather than fixed-income. We may see demand increase for growth-oriented products, if the momentum in equities and economic recovery continues. Josef Mehkri, head of institutional and private banking sales SEB AB A: We saw investors move away from a focus only on credit to look at more equity products as they wanted to benefit from the rally in equities. There is a lot less juice left in credit as spreads have tightened. European high yield has tightened a lot; some banks predict it could come in by a further 100 basis points. Next year, an increase in rates driven by the Fed could be a double-edged sword. Investors in existing notes will suffer mark-tomarket losses, while higher rates will allow new notes to be issued with more attractive coupons.  1 2 3 4 5 6 7 8 9 10 11 
  4. 4. 01.09.14 www.bloombergbriefs.com TOP 10 STORIES To view interactive feature click Bloomberg Brief | Structured Notes 4 below. We took a look at all our front pages from 2013 and selected what we thought were the 10 stories that best captured the trends and issues for the year. 1) EQUITY NOTE SALES SIGNAL POSSIBLE “GREAT ROTATION” Bullishness about stocks, and losses on bonds, made equity-tied notes the year’s biggest bet. In the U.S., such securities (including reverse convertibles) accounted for almost four-fifths of all issuance. 2) FIXED-INCOME FLIGHT SENDS SALES TO 11-YEAR LOW Sales of rate-tied products were poor all year long. For one, the low interest rate environment made coupons on the securities unappealing. Also the possibility that rates would soon start to rise damped enthusiasm for fixed-income notes. 3) LOWEST VOLATILITY SINCE 2007 REDUCES NOTE RETURNS Low volatility bedeviled investors seeking high coupons on structured notes. The VIX Index averaged less than 15 for the year and ended above 20 on only three days, in June and October. 4) LIBOR-TIED NOTE SALES JUMP ON EXPECTED RATE RISE The Federal Reserve’s plans for the stimulus taper – when would it begin and by how much?– kept investors guessing for much of the year. Note buyers responded by purchasing more products tied to Libor where coupons would adjust when rates climbed. 5) INVESTORS SEEK LONGER MATURITIES TO BOOST YIELDS Low interest rates, declining funding costs for banks and less stock volatility hurt note terms. One way issuers responded: they extended maturities to create some yield. 6) ETN ASSETS SURGE ON DIVIDENDS, HIGHER LIQUIDITY U.S. exchange-traded note holdings had soared about 34 percent by September, while structured note sales were down slightly at the time. Some investors favored ETNs for being more liquid and able to access stock dividends. 7) COMMODITY-TIED NOTE SALES SLUMP TO NINE-YEAR LOW Issuance of notes tied to commodities fell sharply. Gold and silver were victims of Fed Chairman Ben S. Bernanke’s plan to slow bond purchases, while other materials such as copper suffered as growth in China’s economy slowed.  1 2 3 4 5 6 7 8 9 10 11  8) U.S. NOTES TIED TO EURO STOXX 50 SURGE ON VOLATILITY Concern about Europe faded as investors took comfort in the European Central Bank president’s pledge to save the euro, whatever it took. Meanwhile the Euro Stoxx 50 Index’s volatility stayed higher than that for U.S. stock benchmarks, allowing issuers to create securities tied to the gauge that paid better returns. 9) GOLD PLUNGE RISKS LOSSES ON $1.1 BILLION OF NOTES A drop in the price of gold put in peril hundreds of millons of dollars of U.S. structured notes. The precious metal declined for the first time since 2000, when it was trading at less than $280 an ounce. 10) BUYERS SNAP UP NOTES TIED TO SINGLE STOCKS Among the signs in 2013 of growing risk appetite: Investors bought a higher percentage of notes tied to single stocks. The securities often had higher volatility than those linked to indexes, which meant issuers could offer more attractive features.
  5. 5. 01.09.14 www.bloombergbriefs.com Bloomberg Brief | Structured Notes 5 ASSET CLASS BREAKDOWN Equity-Tied Notes Soar in U.S. as Credit-Linked Drops Globally 2013 U.S. Other, 3.2% Other, 3.0% 2012 U.S. Hybrid, 2.5% Hybrid, 1.5% Reverse Convertible, 6.0% Commodity, 3.3% Reverse Convertible, 3.8% Commodity, 6.7% Equity, 75.3% Rates, 11.7% Equity, 64.3% Rates, 14.7% FX, 1.5% FX, 2.5% Source: Bloomberg LP Source: Bloomberg LP Investors had a huge appetite for notes linked to stocks, while most other categories shrank. Commodity-tied fell by half, to 3.3 percent. Sales were better distributed in 2012, with four categories over $2 billion (equity, rates, commodity, reverse convertibles), compared to two in 2013. 2012 Global 2013 Global Inflation, 2.4% Other, 8.8% Credit, 55.2% Other, 3.0% Rates, 35.0% Inflation, 2.8% Credit, 53.8% Rates, 39.0% Source: Bloomberg LP Source: Bloomberg LP Market share dipped for notes in three major categories. On an absolute basis, credit-tied dropped 15 percent to $38 billion. Top 10 U.S. Notes iSSUER Bank of America Morgan Stanley Toyota JPMorgan Bank of America Bank of America BMO Morgan Stanley Credit Suisse Bank of America DESCRIPTION 5 yr., tied to Dow Jones Industrial Average 2 yr., fixed to floating rate 18 mo., fixed to floating rate 5 yr., tied to JPMorgan commodity index 3 yr., tied to Euro Stoxx 50 Index 3 yr., tied to Euro Stoxx 50 Index 1 yr., tied to Raymond James stock picks 3 yr., fixed to floating rate 1 yr., tied to Hang Seng China Enter. Index 5 yr., tied to Dow Jones Industrial Average AMT. (MLN $) 284.5 250.0 250.0 239.7 229.8 196.4 185.0 175.0 171.4 166.3 Source: Bloomberg LP The rate-tied and credit-linked categories combined made up almost 95 percent of volume in 2012. Top 10 Global Notes (Outside U.S.) ISSUER Volkswagen Intl. Fin. NV Cassa Depositi Prestiti Palladium Securities 1 SA Landessparkas Olden. MAF Global Securities Banca IMI SpA Mediobanca SpA Cie Financement Foncier Mediobanca SpA Palladium Securities 1 SA DESCRIPTION Perpetual, fixed to floating rate over CMS 10 yr., floating rate over CMS 10 yr., tied to CMS with cap, floor 4 yr., credit-linked note also tied to Euribor Perpetual, fixed to floating rate over CMS 4 yr., fixed to digital coupon tied to Euribor 6 yr., fixed to digital coupon tied to Euro Stoxx 50 20 yr., fixed to CMS rate with cap 5.5 yr., fixed to floating rate over Italy's CPI 6.5 yr., tied to CMS with cap, floor Source: Bloomberg LP  1 2 3 4 5 6 7 8 9 10 11  AMT. (mln $) 993.1 687.1 655.6 506.9 500.0 392.8 270.4 269.5 261.9 257.6
  6. 6. 01.09.14 www.bloombergbriefs.com 6 Bloomberg Brief | Structured Notes monthly sales trends U.S. Sales Recover After Sagging in Mid-Year Sales (left) 4.5 Offerings (right) 4.0 3.5 1000 900 800 3.91 3.67 3.39 3.0 2.5 3.66 3.05 3.05 3.01 3.48 3.44 3.29 3.38 700 600 2.91 500 2.0 400 1.5 300 1.0 200 0.5 100 0.0 Number of Notes Sales proved steadier in 2013 than the year before, when issuance ranged from $2.19 billion in December to $4.54 billion in March. There were five months of less than $3 billion of volume in 2012; last year there was only one. The size of the typical deal crept higher: $4.9 million on average, up from $4.79 million in 2012, after declining from $6.27 million in 2011. 5.0 Billions of $ Issuance in the U.S. started out the year strong, then immediately began to slide. Sales in April, June and July barely eclipsed $3 billion for each month. Then the rebound got under way, propelled by a large amount of stock-tied sales: $2.87 million in August, or more than 82 percent of the overall. 0 Jan. Feb. Mar. April May June July Aug. Sept. Oct. Nov. Dec. Source: Bloomberg LP Global Sales Decline Throughout Year DZ Bank AG was one of the few major issuers that gained sales, climbing to $18.1 billion from $17.1 billion, making the German bank No. 1 again. Those that fell included Deutsche Bank AG, UBS AG and Credit Suisse Group AG. 10 8 7 6 5 4 Sales (left) Offerings (right) 8.86 400 350 300 7.75 7.59 6.52 6.05 250 5.86 200 5.55 4.85 4.81 3 4.02 4.73 150 3.57 2 100 1 50 0 0 Jan. Feb. Mar. April May June July Aug. Sept. Oct. Nov. Dec. Source: Bloomberg LP  1 2 3 4 5 6 7 8 9 10 11  Number of Notes 9 Billions of $ Global issuance, which excludes the U.S. and equity-linked notes, ticked lower almost every month, ending the year at $70.6 billion, the lowest since 2002. A jump to $7.59 billion in May turned out to be no more than a “false spring,” as sales resumed their decline in June. The $4.03 billion of volume in September was less than half the sales of the same month in 2008 — a time when Lehman Brothers Holdings Inc. went bankrupt and the financial system appeared to be coming apart — and the worst September since 2002.
  7. 7. 01.09.14 www.bloombergbriefs.com Bloomberg Brief | Structured Notes 7 noteworthy images A Structured Note Prospectus Made Visual We decided to distill the essence of a typical prospectus — with all its explanations, definitions, examples and risk warnings — into one simple word cloud. Below is what the offering document for Credit Suisse AG’s $4.44 million of leveraged buffered notes tied to the MSCI EAFE Index, sold on Nov. 15, looks like. QUIZ answers on pg 2. Banks now disclose the inital value for their U.S. structured notes. Can you guess how much each of the following was worth in cents on the dollar? I’m a 12-year callable range accrual, tied to Libor and the S&P 500, paying up to 7.4% annually, and sold in August 2012 by Goldman Sachs. a) 88.0 I’m a 2-year note paying 19.5% or more if the rupee gains against the dollar, with 10% of principal at risk, sold by Bank of America in January. a) 92.0 I’m a 3-month reverse convertible, tied to Apollo Group, with a 15.5% annual coupon and 20% buffer, sold by JPMorgan in May. a) 96.2 I’m a 9-year callable range accrual tied to Libor and the Russell 2000, paying up to 7.7% annually, and sold in May by Citigroup. a) 82.2 I’m a 5-year autocallable tied to Ford with a 7.5% annual contingent coupon and 33% buffer, sold in May by Barclays. a) 97.2 I’m a 1-year autocallable tied to the S&P 500, paying up to 7.56% annually, with no buffer, sold in April by Royal Bank of Canada. a) 90.2 b) 91.4 b) 85.0 b) 98.8 b) 96.9 b) 94.5 d) 95.6 c) 98.6 c) 99.4 c) 90.9 c) 90.9 c) 88.7 c) 96.7 d) 97.3 d) 97.0 d) 97.1 d) 93.8 d) 95.5 d) 98.0 1 23456  1 2 3 4 5 6 7 8 9 10 11 
  8. 8. 01.09.14 www.bloombergbriefs.com Bloomberg Brief | Structured Notes 8 top 100 declared holders of largest u.s notes We looked at who owns the largest U.S. SEC-registered structured notes, according to the most recent public filings. We examined the 1,000 biggest notes for each year from 2010 to 2013. We found $1.69 billion of declared holdings for 353 securities. The holdings in the table below are based on notional amounts of the securities, not current values. The last column shows the number of different securities owned. Note: Because of data limitations, some figures may not be exact. To view interactive feature click below. name Auto Owners Group FMR LLC Woodmen World Life Ins. Soc. Alfa Ins. Grp. Prudential of America Group Texas Permanent School Fund Wellesley Investment Advisors Credit Suisse AG Allianz Global Investors CareSource American Equity Invest. Life Ins. State Auto Property & Casualty Waddell & Reed Financial Inc. Mercury General Group American National Insurance Comp. Protective Life Insurance Group Principal Financial Group Inc. Toa Reinsurance Co. of America Valic Co. Berkley Ins. Co. EMC Insurance Company Group Miller Investment Trust Highmark Group AIC Holdings Group Citizens Group Kentucky Farm Bureau Group BCBS of Alabama Group Federated Investors Inc. Oppenheimerfunds Incorporated Allianz Asset Management AG Brinton Eaton Associates Inc. Modern Woodmen of Amer. Nationwide Fund Advisors MGIC Group Statistical Science Incorporated EMC Natl. Life Co. Landesbank Berlin Investment GMB Country Ins. & Fin. Svc. Group Portfolio Strategies Inc. IAT Reinsurance Company Group Arbella Insurance Group Deutsche Bank AG Greek Catholic Union of the USA Mackenzie Financial Corporation Berkley Regional Insurance Co. BSI SA Government Personnel Mutual Life Huntington Trust Company Goldman Sachs Group Inc. Donegal Group holdings ($) 159,600,000 120,000,000 120,000,000 101,725,000 93,000,000 80,000,000 67,243,000 65,900,000 61,337,483 60,500,000 38,500,000 37,300,000 35,300,000 32,798,000 25,000,000 24,000,000 23,940,000 21,500,000 20,753,000 20,000,000 18,000,000 17,000,000 16,486,000 14,607,000 13,250,000 13,000,000 11,750,000 10,321,424 10,273,061 10,000,000 10,000,000 10,000,000 9,800,000 9,700,000 9,582,000 9,000,000 8,650,000 8,227,000 8,000,000 7,868,000 7,000,000 7,000,000 6,500,000 6,268,000 5,000,000 5,000,000 5,000,000 5,000,000 4,195,000 4,127,000 # of notes 7 9 8 13 1 5 2 2 8 13 2 6 1 9 3 1 3 11 9 2 3 2 15 8 3 4 7 2 2 1 1 1 1 4 1 3 3 5 1 5 2 1 7 1 2 1 3 2 2 3 name Charter Insurance Group FFVA Mutual Insurance Company Grange Mutual Casualty Group Mairs & Power Incorporated Mutual of Omaha Group Franklin Resources Investors Capital Advisory Svcs. Tricadia Holdings Group Physicians Professional Liab. RRG Pax World Management LLC First American Title Group Ameriprime Funds American National Financial Group Ameritas Mutual Holding Group GuideOne Insurance Group Marysville Mutual Insurance Co. Meridian Security Insurance Co. City National Bank Catholic Order of Foresters Guard Insurance Co. Group ProAssurance Ind. Co. Inc. Rockhill Ins Co. SPJST Van Enterprises Group Western Fraternal Life Assoc. National Farm Life Insurance Co. Sons of Norway American Eqty. Investment Life Texas Farm Bureau Mutual Group Viva Health Inc. Physicians Reciprocal Insurers Amerco Corporation Group Everett Mutual Group Thompson Investment Management Countrywide Ins. Co. EMC Reinsurance Company Grinnell Mutual Group North Star Company Group WesBanco Trust & Investments Pioneer Western National Mutual Group Florida Peninsula Ins. Co. Zazove Associates LLC Indiana Farm Bureau Group RLI Insurance Group Pilco Cos. Group Premier Fund Managers Ltd. Florida Family Ins. Co. Guaranty Income Life Insurance Transamerica Investment Services Source: Bloomberg LP  1 2 3 4 5 6 7 8 9 10 11  holdings ($) 4,100,000 4,000,000 4,000,000 4,000,000 4,000,000 3,950,000 3,697,000 3,650,000 3,295,000 3,177,000 3,100,000 3,098,000 3,000,000 3,000,000 3,000,000 3,000,000 2,650,000 2,505,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,500,000 2,375,000 2,300,000 2,250,000 2,250,000 2,210,000 2,200,000 2,190,000 2,100,000 2,045,000 2,000,000 2,000,000 2,000,000 2,000,000 2,000,000 1,995,000 1,850,000 1,760,000 1,760,000 1,700,000 1,700,000 1,550,000 1,550,000 1,500,000 1,500,000 1,500,000 # of notes 18 6 3 6 1 2 2 11 3 2 2 5 1 1 2 22 2 2 5 3 2 1 3 3 3 5 3 2 4 3 5 2 5 6 1 1 3 2 3 5 2 1 1 1 1 1 1 3 3 1
  9. 9. 01.09.14 www.bloombergbriefs.com 9 Bloomberg Brief | Structured Notes Top holders Most Popular Underlyings Include Libor, Inflation Index A Closer Look at Holders DoubleLine Capital LP, the investment firm run by Jeffrey Gundlach that manages about $53 billion, dropped off our ranking after sitting atop the third-quarter holders’ table. The Los Angeles fund appears nowhere in our year-end top 100. Last year, DoubleLine owned $200 million of two- to four-month securities, which were tied to Invesco Ltd.’s PowerShares Senior Loan Portfolio exchange-traded fund and the iBoxx Liquid High Yield Index, according to data compiled by Bloomberg from public filings. JPMorgan Chase & Co. sold the notes on May 14 and 15. They each paid a 5 percent annual coupon and the gains of the underlying gauge above a break-even point, according to their prospectuses filed with the U.S. Securities and Exchange Commission. The notes all lost value, Bloomberg data show. Loren Fleckenstein, an analyst at DoubleLine, didn’t return voicemails seeking comment. Libor ■■ Insurers had the most holdings, Bloomberg data show. They owned $1.06 billion, or more than three-fifths, of the investments in our sample. They were followed by investment advisers ($542.7 million) and pension funds ($80 million). Only one investor occupied the pension fund category: the Texas Permanent School Fund, which owned four securities tied to the consumer price index and one linked to Libor. Dow Jones-UBS Cmdty. Index Consumer Price Index International Paper Google Qualcomm Constant-maturity swaps EMC 0 Source: Bloomberg LP It’s no surprise that the largest amount of holdings — 87 percent, or $1.47 billion — can be traced to U.S. institutions. After that though, the list becomes less obvious. In second place was Britain ($121.6 million), followed by Switzerland ($65.9 million) and Germany ($25.7 million). 100 200 Millions of $ 300 400 500 Investors owned $438.6 million of notes linked to Libor. The Dow-Jones UBS Commodity Index (and its variations) was second-most popular, at $173.1 million in 10 holdings, while the consumer price index trailed with $144.7 million, though with 49 investments. Investors Prefer 15-Year Maturities Over 20-Year, 10-Year 100.00 ■■ ■■ Most popular underlyings among $1.69 billion of declared holdings. The darker the color, the higher the number of investments. For example, notes linked to Qualcomm and EMC made up only one holding each, while those tied to Libor belonged to more than 180. Millions of $ 10.00 1.00 0.10 0.01 Points represent all 693 holdings in our sample, by size and maturity. Y axis uses a logarithmic scale. 0.00 0 5 Source: Bloomberg LP 10 15 Term in years 20 25 30 35 Almost a third of the holdings, or 207, in our sample matured in 15 years. That compares with 102 coming due in 10 years and 99 maturing in 20 years. The average maturity for the investments was 11 and a half years. That’s about four times as great as the average for all notes issued in 2013. — Kevin Dugan, Richard Bedard  1 2 3 4 5 6 7 8 9 10 11 
  10. 10. 01.09.14 www.bloombergbriefs.com 10 Bloomberg Brief | Structured Notes U.S. Rankings by asset class All Asset Classes Interest Rate-Linked 2013 Sec-registered structured Note issuers* Bank of America JPMorgan Barclays Morgan Stanley Goldman Sachs HSBC RBC Credit Suisse UBS Deutsche Bank Citigroup Wells Fargo Scotiabank Toyota SEK BMO Lloyds SunTrust Nomura CIBC TOTAL (Jan. 1 to Dec. 31, 2013) Rank ⬆ ⬆ ⬇ ⬇ ⬆ ⬇ ⬇ ⬆ ⬆ ⬇ ⬇ ⬆ ⬆ ⬆ ⬆ 2012 Rank market share 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 20 1 4 3 8 2 5 7 10 6 9 11 12 17 16 13 15 18 19 — — 21 15.6% 11.7% 11.0% 10.5% 9.3% 7.8% 7.6% 6.6% 5.9% 3.8% 3.8% 1.7% 1.5% 1.2% 1.0% 0.8% 0.2% 0.1% 0.0% 0.0% 100.0% volume usd (MLN) 6,328.2 4,721.7 4,470.0 4,249.5 3,785.7 3,155.5 3,059.7 2,655.4 2,381.6 1,553.9 1,528.2 683.1 595.4 495.5 405.5 323.2 60.9 36.0 10.0 3.3 40,502.2 Equity-Linked 1 1 20.8% volume usd (MLN) 989.8 Morgan Stanley ⬆ 2 6 11.9% 564.1 RBC ⬆ 3 5 10.8% 511.6 Toyota ⬆ 4 9 10.4% 495.5 Barclays ⬇ 5 3 10.2% 482.7 Citigroup ⬆ 6 10 9.9% 471.9 JPMorgan ⬆ 7 8 9.6% 457.9 Wells Fargo ⬇ 8 7 6.0% 285.2 Scotiabank ⬆ 9 16 3.4% 163.4 HSBC ⬆ 10 11 2.3% 110.7 Bank of America ⬇ 11 2 2.0% 97.1 Lloyds 12 12 0.9% 40.9 SunTrust 13 13 0.8% 36.0 Rank Goldman Sachs 2012 Rank market share Deutsche Bank ⬆ 14 18 0.5% 26.1 Nomura ⬆ 15 — 0.2% 10.0 BMO ⬆ 16 17 0.1% 5.4 Credit Suisse ⬆ 17 — 0.1% 2.6 17 18 100.0% 4,750.9 TOTAL (Jan. 1 to Dec. 31, 2013) Commodity-Linked 2013 Sec-registered structured Note issuers* 1 1 19.4% volume usd (MLN) 5,911.5 Barclays ⬆ 2 6 11.0% 3,348.5 Morgan Stanley ⬆ 3 7 10.8% 3,302.9 4 4 10.0% 3,049.4 3 8.9% Rank Bank of America JPMorgan 2012 Rank market share market share volume usd (MLN) 1 Barclays 2012 Rank 1 27.4% 363.5 2 8 14.5% 192.7 Bank of America ⬇ 3 2 13.5% 179.2 2,716.7 Deutsche Bank ⬇ 4 3 11.4% 150.9 Morgan Stanley ⬆ 5 9 7.8% 104.2 6 6 7.8% 103.0 5 Goldman Sachs ⬇ 6 2 8.1% 2,468.0 Credit Suisse ⬆ 7 10 7.8% 2,365.1 8 8 6.7% 2,029.0 Goldman Sachs SEK ⬇ 7 4 5.5% 73.0 UBS ⬇ 8 7 5.0% 66.3 781.8 Citigroup ⬆ 9 10 3.5% 46.9 430.6 HSBC ⬇ 10 5 2.2% 29.3 RBC 11 11 0.7% 9.6 316.7 Credit Suisse 12 12 0.5% 6.4 0.0% 3.3 Wells Fargo 13 13 0.2% 2.7 100.0% 30,498.4 tOTAL (Jan. 1 to Dec. 31, 2013) 13 14 100.0% 1,327.5 UBS ⬇ 9 5 6.6% 2,003.3 Deutsche Bank ⬇ 10 9 3.4% 1,048.1 11 11 2.6% Scotiabank ⬆ 12 15 1.4% Wells Fargo ⬇ 13 12 1.3% 395.3 SEK ⬇ 14 13 1.1% 328.2 BMO ⬇ 15 14 1.0% CIBC ⬆ 16 — 16 16 Citigroup Rank ⬆ ⬇ RBC 2013 Sec-registered structured Note issuers* JPMorgan HSBC TOTAL (Jan. 1 to Dec. 31, 2013) 2013 Sec-registered structured Note issuers* * Based on data compiled by Bloomberg from SEC filings.  1 2 3 4 5 6 7 8 9 10 11 
  11. 11. 01.09.14 www.bloombergbriefs.com Bloomberg Brief | Structured Notes 11 european Rankings by asset class All Asset Classes Interest Rate-Linked 2013 Rank structured Note issuers* DZ Bank AG LBBW Societe Generale SA Deutsche Bank AG Credit Agricole Groupe Nordea Bank AB Barclays PLC BayernLB Holdings AG Standard Chartered PLC BNP Paribas SA Sparkassen- und Giroverband Porsche Automobil Holding SE HSBC Holdings PLC WGZ Beteiligungs GmbH JPMorgan Chase & Co Mediobanca SpA Credit Suisse Group AG DekaBank Deutsche Giroz. ING Groep NV Cassa Depositi e Prestiti TOTAL (Jan. 1 to Dec. 31, 2013) ⬆ ⬆ ⬇ ⬆ ⬆ ⬆ ⬆ ⬆ ⬆ ⬆ ⬆ ⬆ ⬆ ⬆ ⬇ ⬆ ⬇ ⬆ 2012 Rank market share 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 120 1 4 5 2 12 19 7 39 10 13 69 — 17 26 23 42 9 88 8 76 118 28.9% 8.9% 7.5% 7.4% 2.6% 2.6% 2.4% 2.2% 2.1% 1.9% 1.9% 1.7% 1.6% 1.6% 1.6% 1.4% 1.4% 1.2% 1.2% 1.1% 100.0% 2013 volume usd (MLN) 17,330.55 5,307.55 4,481.18 4,457.31 1,565.39 1,554.03 1,437.72 1,332.49 1,275.45 1,164.27 1,109.21 993.08 968.59 944.15 933.31 859.24 836.49 734.30 703.59 687.09 59,924.52 Credit-Linked structured Note issuers* DZ Bank AG Deutsche Bank AG Sparkassen- und Giroverband Porsche Automobil Holding SE WGZ Beteiligungs GmbH Societe Generale SA Cassa Depositi e Prestiti SpA Barclays PLC Credit Agricole Groupe Intesa Sanpaolo SpA Muenchener Hypothekenbank HSBC Holdings PLC HSH Finanzfonds AoeR BNP Paribas SA Goldman Sachs Group Inc. Standard Chartered PLC ING Groep NV Banque et Caisse d'Epargne Kommunekredit BayernLB Holdings AG TOTAL (Jan. 1 to Dec. 31, 2013) Rank ⬆ ⬆ ⬆ ⬇ ⬆ ⬆ ⬆ ⬇ ⬆ ⬆ ⬇ ⬇ ⬆ ⬆ ⬇ ⬆ ⬆ ⬆ 2012 Rank market share 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 69 1 2 63 — 13 5 — 19 29 3 35 52 8 6 76 61 10 56 — 21 82 27.5% 6.6% 6.1% 5.7% 5.4% 5.3% 3.9% 3.9% 3.4% 2.9% 2.7% 2.6% 1.7% 1.7% 1.6% 1.5% 1.4% 0.9% 0.9% 0.7% 100.0% Inflation-Linked 2013 Rank structured Note issuers* DZ Bank AG LBBW Societe Generale SA Deutsche Bank AG Nordea Bank AB Standard Chartered PLC JPMorgan Chase & Co BNP Paribas SA DekaBank Deutsche Giroz. Barclays PLC Credit Suisse Group AG UniCredit SpA Landessparkasse zu Olden. Credit Agricole Groupe ING Groep NV HSBC Holdings PLC VIS Finance SA Erste Group Bank AG Skandinaviska Enskilda Banken Banco Espirito Santo SA TOTAL (Jan. 1 to Dec. 31, 2013) volume usd (MLN) 4,796.43 1,154.27 1,063.96 993.08 944.15 932.17 687.09 674.48 600.49 503.37 466.38 454.18 298.21 290.58 278.93 253.01 251.05 164.28 150.00 130.64 17,425.34 ⬆ ⬆ ⬆ ⬆ ⬆ ⬇ ⬇ ⬇ ⬆ ⬆ ⬇ ⬇ ⬆ ⬇ ⬆ ⬆ 2012 Rank market share 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 63 1 2 9 4 13 6 16 19 43 5 7 8 — 18 10 15 23 11 20 22 54 36.8% 14.9% 8.2% 5.8% 4.6% 2.7% 2.5% 2.0% 2.0% 1.9% 1.8% 1.6% 1.5% 1.5% 1.3% 1.3% 1.2% 0.8% 0.7% 0.7% 100.0% 2013 volume usd (MLN) 12,467.51 5,030.79 2,765.21 1,950.03 1,554.03 924.37 848.86 693.16 667.88 642.00 598.54 553.38 522.18 496.60 452.55 449.74 411.52 259.32 248.39 238.56 33,871.25 Rank structured Note issuers* Raiffeisen Landesbanken Mediobanca SpA LBBW Societe Generale SA BayernLB Holdings AG HSH Finanzfonds AoeR Deutsche Bank AG BNP Paribas SA Enel SpA Junta de Extremadura Sparkassen- und Giroverband Van Lanschot NV Banco Santander SA UK Financial Investments Ltd Credit Mutuel-CIC Group Credit Agricole Groupe Banque et Caisse d'Epargne Volksbanken Holding eingetrag. Nordea Bank AB KBC Groep NV TOTAL (Jan. 1 to Dec. 31, 2013) * Based on data compiled by Bloomberg that excludes variable-principal redemption notes.  1 2 3 4 5 6 7 8 9 10 11  ⬆ ⬆ ⬆ ⬇ ⬆ ⬆ ⬇ ⬆ ⬇ ⬆ ⬆ ⬆ ⬆ ⬆ ⬇ ⬆ ⬆ ⬇ ⬇ 2012 Rank market share 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 2 11 6 3 — 8 5 13 7 — 16 23 20 14 — 4 — 27 15 17 34 18.2% 18.1% 15.9% 8.7% 8.2% 6.3% 5.1% 4.7% 4.0% 2.5% 2.0% 1.5% 1.2% 1.0% 0.8% 0.8% 0.4% 0.2% 0.2% 0.1% 100.0% volume usd (MLN) 295.62 294.27 258.87 140.67 133.06 102.36 83.25 76.65 64.49 41.33 32.34 24.64 20.00 16.28 13.00 12.28 6.65 3.99 2.65 1.37 1,624.22

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