On December 18, BCS Global Markets placed on the Moscow Exchange a structured bond linked to the risks of several major Russian corporations – GTLK, Polyus, Alrosa, Evraz, Sibur, VimpelCom – with a view to increase the return on investor portfolios.
With such a security, the investor takes a credit risk of several issuers instead of just one, and the use of borrowings (leverage) allows for a higher coupon rate compared to the average return on a similar bond portfolio formed with the investor’s own funds (a repo bond portfolio). With this structured bond, unlike the situation with a repo portfolio, the client is not exposed to market volatility risk, and, therefore, avoids demands imposed by broker margin calls.
In the Russian equity market, the FTD type structured bond is an instrument of this type offered for the first time. Only foreign issuers have offered similar securities to Russian investors before BCS Global Markets.
This structured bond issue is registered under Russian law within the scope of the joint project of BCS Capital and BCS Global Markets.
Lubov Romanova, Deputy Head of Derivatives Department, BCS Global Markets, commented:
Year-end 2019 has been marked by the mass arrival of private investors to the Russian bond market, where BCS Global Markets has proven itself as one of the industry leaders. The security offered by our departments of debt capital markets and derivative operations became a logical continuation of development of the fixed income instruments line. We consider that it will not only be in demand with institutional investors, but will also become highly popular among retail investors.