Barclays Capital’s head of investor solutions, Americas, tells Kathryn Tully how he successfully built a team from scratch to develop tailored structured products across all asset classes as well as equity and fund derivatives solutions.

Philippe El-Asmar describes his job as “very busy, but in a good way”. He certainly has a lot on his plate. Working with Barclays Global Advisors, his investor solutions group debuted the market’s first exchange traded notes, branded iPath, last June. (Instead of tracking a basket of securities as exchange traded funds do, iPath are debt securities listed on the New York Stock Exchange or Amex that are linked to the performance of one index.)

The group now has eight separate, open-ended exchange-traded note (ETN) offerings for US investors. Last year came three different commodity-linked ETNs and one linked to the India MSCI. In May this year it launched

three different currency ETNs linked to the pound, euro and yen, and one strategy ETN linked to the S&P500 BuyWrite Index. Collectively they already have a market capitalisation of close to $3bn.

On top of that, the group has launched about 700 different individual public structured product offerings for clients since the beginning of the year, from single equities and indices to commodities to currencies, inflation or sometimes a combination of different asset classes.

Small acorns

In the US, Barclays is receiving increasing recognition of its structured products innovation, yet three and half years ago there were no revenues, no plaudits, no staff, no group, in fact there were no phone calls. “At the very beginning, it was very difficult to get the phone to ring, to be fair. As I was the only person here at the time, that was unfortunate,” he laughs. “It took us about six months to get the first trade on.”

Mr El-Asmar says that initially clients were sceptical about what Barclays Capital could really offer investors by way of structured products in the US, given its fixed income focus. “They would say ‘you’re not an equity shop, you’re a fixed income shop’. But over the past few years, there’s been a complete refocus throughout the entire bank on equity derivatives, commodities and foreign exchange and people are seeing that we keep delivering in those areas too.”

After some intensive hiring, the investor solutions group is now 25-people strong and most of the work it does is equity linked, although there is a growing demand for foreign exchange and commodities products.

Being charged with the task of building a group from scratch was a challenge not to be sniffed at, and he says that this is what attracted him to the bank from Société Générale, where he had worked in predominantly equity derivatives roles in Asia and the US.

He says: “At SG I was in one division without much access to the others. A key fixed income client, for example, might not have any dealings with the equity desk.

“When I joined Barclays Capital, the plan was to create a platform that would provide the same standard of service to different clients across multiple asset classes. We differentiate ourselves by having all assets under one roof.”

The group is sub-divided four ways in the US. The iPath product comes from the structured products team, which focuses on structuring and selling products to financial intermediaries that sell on to retail investors. Then there is the over-the-counter derivatives team, which offers everything from basic total return swaps to more complex dispersion and correlation trades to pension funds, hedge funds and endowment funds. Its fund derivatives team channels products to fund managers, while the structuring and product origination team focuses on formulating new offerings.

Lack of baggage

Mr El-Asmar thinks that building the group from scratch also contributed to its success. “Maybe that was our advantage because we could shape it in the way that was in the best interests of the client,” he says.

“A lot of banks try to copy that model, but very few have succeeded in going all the way. We had to build the platform, create the vehicles, hire the people, evolve the product infrastructure, but we didn’t have any heavy luggage to carry in terms of a cash equity or advisory business.”

He thinks that not being a US bulge bracket player has also helped the team win this sort of high-end structuring business in some parts of the market. “Because we’re not perceived as a competitor trying to steal end clients, we have an advantage in working with third-party distributors, for example. We don’t have a retail or private bank in the US and lot of large broker dealers like to work with us for that reason.”

To be fair, success has also been down to the hiring of talent from 12 or more competitors, drawing on their respective cultures, experience and client relationships. “That’s added up to a good story,” says Mr El-Asmar. “It’s been very interesting.”

Yet having many staff is not the crucial thing in making this sort of business a success in the Americas, according to Mr El-Asmar. It has been streamlining processes over the past three and a half years which has managed to bolster volumes so much.

“In Europe and Asia, it’s all about how funky or gimmicky the structuring is. In the US, that simply does not sell. The iPath product, for example, is a very simple access product. Here people like very simple products, so it’s more a question of volumes than financial engineering. You don’t need an army of people to do this; it’s much more about industrialising the process and being able to roll out product offerings on a consistent basis.”

Volume business

That is obviously working. Whereas, at the beginning, the group would only issue one or two equity-linked notes a month, it now issues between 50 and 75.

Making this a volume business has partly come through the development of infrastructure, such as the launch of a web portal that allows investors and intermediaries to trade structured products themselves.

Some of it simply comes down to streamlining documentation. Whereas, for example, the group would produce separate offering documents for every issue, it now uses more standardised document offerings. “We’ve tightened the screws on the regulatory, listing and registration process to reduce the cost per offering and hence be more competitive in what we offer clients,” he says.

That will not stop the launch of new products from the group, however. Particularly not of ETNs, which Mr El-Asmar hopes will replicate, in part, the exponential growth of the predecessor product in the market, exchange-traded funds. “We will probably launch between four and six commodity sub-sector ETNs by the end of the year, in areas such as agriculture, energy and metals. We’re also working on a few more ETNs that will give US investors access to emerging market equities.”

He thinks that because, like exchange traded funds, they provide simple, transparent, easily tradable exposure to markets that are difficult to reach at the fraction of the cost of closed end funds, demand will continue to grow quickly. He cites the example of the iPath MSCI India Index ETN, which has seen much institutional interest and now has a market capitalisation of nearly $500m, but has seen 10 times that amount of volume traded since it was launched last December.

“Our ETN provides access to Indian equities at 89 basis points per year, whereas all that existed before serving that market were closed end funds between 1.5% and 2%.”

And given that the Investors Solutions Group sits within the broader equity-linked group in the bank, where the plan is to double or triple revenues in the next two to three years by expanding in Canada and Latin America, focusing on prop trading in equities and reaching out to new investor groups such as the high net worth market directly, rather than through intermediaries, among other initiatives, the roll out of new products will not stop there.

It does not look as if Mr El-Asmar will spend any more of his Barclays Capital career waiting for the phone to ring.

CAREER HISTORY

2004: joined Barclays Capital in New York to become managing director and head of investor solutions, Americas.

2001: moved to SG Cowen, where he was head of retail sales, Americas, and head of structuring, Americas, where he oversaw activities related to the structuring and pricing of equity derivatives.

1997: joined Société Générale in Japan, where he was responsible for structuring equity derivatives for Japan and Asia excluding Australia.

1996: graduated from ESSEC business school in France.

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