Structured products represent a market of nearly 200 billion Swiss francs in Switzerland. Until now, however, there has been no objective measurement tool for their performance.

The industry association SSPA (Swiss Structured Product Association) now presents the «SSPA MBRC Global Index» in CHF, EUR and USD, according to a press release issued on Tuesday.

The index is based on twelve standardized Barrier Reverse Convertibles (BCRs) referencing the S&P 500, Euro Stoxx 50 and Nikkei 225, each with a one-year maturity and a 70 percent knock-in barrier.

«A Meaningful Benchmark»

«This index further enhances transparency for structured products a dn can contribute to broader acceptance,» says Georg von Wattenwyl, President of the SSPA, in an interview with finews.ch. «For the first time, a meaningful benchmark has been established, similar to what exists in other asset classes.»

The initiative was developed in close collaboration with the buy-side. «The buy-side expert group that initiated and guided the. index includes representatives from Switzerland's leading private bankind and wealth management institutions,» emphasizes Sylveline Besson, board member of the SSPA and Head of Marketing at Indosuez Wealth Management in Geneva. «The index responds to a strong demand from the buy-side.»

Built on Barrier Reverse Convertibles

The index design is «very close to market reality» as it is based on yield-enhancement products - a category that accounts for roughly 50 percent of the market.

Peter Keller from the SSPA office, who was responsible for the methodology, explains: «We are providing a benchmark through which performance and risk indicators can be compared both within the industry and against other asset classes. Backtests demonstrate that barrier reverse convertibles offer a very attractive risk-return profile.»

New Index EKI70 (blue line)
Comparison with Equity Markets:
- M0WOHCHF: MSCI World NTRI 100% Hedged CHF
- MGWO: MSCI World NTRI
Comparison with Money Markets:
- G5S0: ICE BofA 1–10Y Switzerland Government Index
- L5SF: ICE BofA CHF 3M Deposit Rate Index
(Image: zVg)

In Collaboration with Solactive, Deritrade, Evooq and Avaloq

The barrier was set at 70 percent, «as this represents the optimal level where the majority of capital is actually invested».

Index calculation is carried out by Solactive, with pricing provided through the multi-issuer platforms Deritrade and Evooq. Avaloq serves as the independent valuation agent.

A Tool for the B2B Market

According to the SSPA, extensive backtesting since 2008 shows that the index has consistently established itself over the long term - delivering stable coupon income and significantly smaller drawdowns compared to equity markets.

Von Wattenwyl describes it as a «central instrument in the association's communication», which should, over time, also establish itself in members' B2B activities. He adds: «I am proud of our industry, which once again proves itself to be pioneering on a global scale and demonstrates how we bring all ecosystem participants together to drive innovation».