FEATURE | Q&A
Qontigo: customisation and technology are at the core of our strategy Qontigo won the Index of the Year award in this year’s SRP Europe conference with a joint submission with French financial intermediary firm Silex on the Euro iStoxx Ocean Care 40 index. SRP spoke to Axel Lomholt (pictured), Qontigo’s chief product officer indices about investment themes, opportunities for growth, structured products and the threat of new entrants in the indexing space. MAJOR THEMES According to Lomholt, there are five major themes that are playing out in the market currently - some are old themes that are gathering a lot of momentum now, and others are new themes.
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he index selects 40 European large capitalisation stocks using 12 criteria regarding oceans preservation and allows investors to reduce their impact on oceans with an index that has Green House Gas intensity four times lower than the Eurostoxx 50 the Euro iStoxx Ocean Care 40 index has been deployed in its decrement version across 29 products sold in the French market worth an estimated US$400 million.
“The true beauty of this index is achieving ocean friendly and low carbon selection while maintaining a behaviour extremely close to that of the Eurostoxx 50 (correlation above 99%),” stated the Qontigo submission. “We believe that this solution which brings better pricing for structured product without performance trade-off, an extremely close behaviour to the Eurostoxx 50, and reduction of the carbon footprint, in a highly competitive environment, has significantly improved the value proposition for structured products investors in Europe.”
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www.structuredretailproducts.com
“ETFs continue to dominate distribution and it is a theme that has established itself over time,” says Lomholt. “We have a tendency to think about ETFs as a product, but actually ETFs have become so successful because they disrupted legacy distribution practices that had been controlled by banks and other financial services companies for a long time.” ETFs continue to wedge into these distribution channels and have become a threat to high-cost active management. “This trend has been around over the past decade, but now it is really cementing itself, and any new investment ideas are first deployed via ETFs as a mainstream and wide-reaching channel,” said Lomholt. The second trend is index co-creation by clients that want to use their own data. “This is a fascinating new theme which is in line with the market shift towards customisation at a level we have never seen before,” said Lomholt. “We have all grown up with indices that were broadbased, and then we saw factor-based indices and other strategies coming to
the market. But now, we are getting to a completely new level with very specific requests for targeted exposures.” This shift has had a significant impact on the industry which has seen a myriad of data providers developing new ways of getting data, including artificial intelligence. “As an index provider this is very interesting because it has opened new opportunities to work with data providers and go beyond our own research,” said Lomholt. The third trend is also based on an old theme which is portfolio construction with passive investments. The low-cost replication of standard indices has given way to intraday liquidity - index investors are not just buying the market passively anymore. “Technology has enabled much deeper liquidity and the sophistication of trading is being used to build portfolios using these low-cost ETFs and other listed products which enables portfolio managers to slice and dice investment portfolios,” said Lomholt. “That means that demand for thematic exposures can be addressed in different ways.” Next in line is sustainable investing which has become one of the guiding principles for investors and is now an integral part of the capital markets offering. “A few years ago, sustainability was about ESG benchmarks and indices, and creating new products. But the way we see it now is that sustainability is going to change the entire capital market system,” said Lomholt.
