The rise in interest rates heralds "the return of '100% capital guarantee' products"

RR: A structured product is a product that could be described as "all terrain". We create tailor-made products from different components. These are products adapted to any type of investor, from the most prudent to the most opportunistic in the market.

From a purely financial point of view, a structured product is a nesting of two components: the bond component and the option component. The first is the defensive base. With our partner banks, we issue the so-called structured product. This is commonly called a "zero-coupon bond" which corresponds to the issuer's obligation. 

Then, depending on the issuer [there are disparities between banks], we will add what we call options. This will constitute the performance engine. We will package an underlying asset - for example the CAC40 or the LVMH share - in the structured product and this will allow us to have a predefined return. 

Finally, this so-called nesting will allow to "play" between the risk that the investor is able to take and the potential or guaranteed return. The structured product offers a security - partial or total - that very few asset classes can provide.

How do structured products react to inflation? 

Regarding inflation, we saw a shift last March and the start of the war in Ukraine. When we talk about inflation, we also talk about rising interest rates. So all the products that were issued last year or before March are experiencing a rise in rates. And when rates go up, the valuation of the products tends to go down in terms of value. 

In this case, product valuations are fluctuating below the initial value due to the "rate effect". You must also add the market effect - which has been negative since the beginning of the year -. In fact, valuations are down, but that does not mean that the underlying assets are doing very badly. Moreover, most of our products issued in 2021 have built-in mechanisms to recall or distribute the return even if the market falls, which is a major advantage in the current context.

ARGO, created five years ago, is Lynceus' technology platform. It is a management and centralization tool for all products. ARGO also offers what is called an integrated "multi-pricer". This feature allows us to query some fifteen issuers connected to our platform - the most popular in France - and to obtain the best prices in a few minutes. 

The idea is to offer our clients - asset management consultants, family officers, managers, private bankers - a platform to build the bespoke product they want to create with our partners. 

The advantage for the client is that he can centralize all products - designed with or without Lynceus Partners - on the platform. We are still ahead of the game and a V3 will soon be available with new features [see below]. 

Several, but what is always advantageous with structured products is that many parameters are adjustable. For our structurers, these rising rates are good news! Indeed, it announces the return of "100% capital guaranteed" products. 

Six months ago, these products were established on maturity periods of seven to ten years, often for institutional clients. Today, for similar or even better rates, these products can be created for periods of two years or less. 

The returns are relatively low but they are still much better than traditional investments such as term deposits or euro funds. Also, structured products are gaining a lot of ground in cash management with maturities that also range from two to three years. 

Moreover, we are in a very uncertain environment. Structurally, the market is likely to be very complicated this year. We are integrating degressivity into our products and significant capital protection. Thanks to this approach, we will generate performance, even if the market declines.