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Dutch manager goes with SG for first participation play in a decade

Dutch fund manager Wilgenhaege has launched Indexversneller 142% (Index Accelerator 142%) in the Netherlands.

management, asset management & private investments, Wilgenhaege.

“We are now going for the upside of the stock markets with an enhanced leverage,” said Smelt, adding that the company’s change of tack is partly down to the state of the markets, which have considerably fallen in the first three quarters of 2022.

“The financial markets have now reached a level where we believe valuations are healthy and in some respects even undervalued given the fundamental upside potential,” he said.

The 3.5-year note is issued on the paper of Société Générale and linked to the Eurostoxx 50. At maturity, if the index performance is positive, the product offers 100% capital return plus 142% uncapped participation in the rise. The barrier for capital protection is 80% – below that the return is equal to the index performance.

The structure is Wilgenhaege’s first participation note in more than nine-years, having recently focused on Athena and Phoenix autocalls – either on single stocks or a worst-of basket.

“[This product] is a different set-up than the autocallables that we have launched in different variants in recent years,” said Tjerk Smelt (pictured), director relationship

The product has a maturity of 3.5-years and Wilgenhaege provides daily liquidity. “Our investors prefer short-term investments, at least with an exit option, but people also want a considerable upside, and an even shorter term would mean lower participation levels – 3.5 years is then appropriate,” said Smelt.

In recent years, in an era of extremely low interest rates, structuring investment products, especially in combination with protection or a guarantee, has been difficult, according to Smelt.

“The autocallables were a very good solution during this time [...] now that interest rates are higher, it is again possible to look at indexes instead of individual stocks.

“That brings diversification to our palette of possibilities, although the Indexversneller is a repetition of products that we also successfully released up to 10 years ago,” said Smelt, referring to five participation notes that were distributed by the fund manager between May 2004 and September 2013 – three of which were linked to the Eurostoxx 50 with the remaining two tied to a basket of shares.

“The target group [for participation notes] is perhaps a bit more conservative than the target group for the autocallables, after all, it is a broad index,” said Smelt.

“On the other hand, this is a product without interest payments, but with a nice upside, in other words, the stock market has to rise for a return.

“I expect that, if, among other things, interest rates remain the same or start to rise a little more, we will put these products, or similar, on the market more often,” he said.

Should interest rates rise further, products providing 100% guarantee could also become back in vogue, according to Smelt. “At the moment, these products are still only possible with a tenor that is too long or with a leverage that is too low.”