| Treasurers turn to commodities for investment opportunities |
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By: David Kiely, David Kiely
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| David Kiely examines the changing variety of investment products available for treasurers, and notes the increasing use of commodity type products, such as commodity-linked capital protected deposits, and property trusts. |
The Treasury & Investor Solutions team in Ulster Bank Capital Markets has an exciting and varied business. We put together investment deals offering access to any market globally. We help our clients with their commodity and inflation risks. We spend a lot of time figuring out new ways to provide a great service. I love coming into the office. The excitement and energy of the business we work in drives our clients’ success, and then our success. Being part of The Royal Bank of Scotland, one of the world’s largest banks, makes a huge difference. The bank’s global reach brings real strength and depth. | | David Kiely |
The Investor Solutions part of the business operates in an exciting time and has seen significant change in recent years. Products have changed. Assets have changed. A market dominated by tracker bonds only a few years ago has seen many new developments. From managed fund and fund of fund products to tracker type deals with more complex payouts. Things have really changed.
We have also seen a widening of the asset classes that investors want access to. Where in the past the equity market was the only player at the table, it now sits with property, commodities, and foreign exchange amongst others. Commodity-linked capital protected deposits for example have been heavily in vogue, where investors have sought to catch the China story. Commodity markets took a dive along with markets in general in early summer, but still show strong potential. A case in point is The London Metal Exchange copper contract (a metal hugely in demand from the construction industry) which has gained almost 60 per cent over the course of the year despite the summer dip, from $4,440 per metric ton to $7,080 as at the end of November. This has been reflected across the industrial metals world. Over the longer term countries like India and Brazil will play a big role in these markets and will soon come into the public imagination.
Property has also played a strong role in recent deals we have done, particularly for high net worth clients. The European Public Real Estate Index, a proxy to European property investment, has been a real success for our clients. Many have now expanded into Japanese property for instance through access to Tokyo Real Estate Investment Trusts.
In the institutional and credit union market there are often quite different needs. Capital protection, credit rating (Ulster Bank is a AA rated bank), income and other portfolio issues play a big role. For example, we have seen a lot of interest in interest rate range accruals. These deals can pay a much higher interest rate than standard deposits. They are very attractive in the form of capital protected deposits especially when interest rates, though rising, are still low compared to returns from other markets. The RBS group is a big player in this area and we can provide real strength to our clients when it comes to putting these deals together.
In fact, though we always have strong general product, our key service to all of our institutional, credit union and high net worth clients is being able to offer this tailored service. We start with a blank piece of paper and build an offering which reflects the specific needs of the client. This can relate to the deal itself or indeed to service need, a really key part of what we do.
Listening carefully to our clients is a key part of our offering. Our group strength is a key part of our offering. Our people are a key part of our offering. I believe we have a powerhouse that sits at the fingertips of every client we talk to. |
David Kiely is head of treasury & investor solutions at Ulster Bank Capital Markets.
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