Citi Exclusively Distributes Innovative Adjusted Returns Indices on Single Stocks

LONDON--(BUSINESS WIRE)--Citi has partnered with STOXX Qontigo to develop a series of single stock linked indices in an effort to generate a more efficient structured product universe for financial intermediaries and end investors.

The Single Stock Decrement Indices are adjusted returns indices where each index references one of 23 blue-chip single stock names. There are three different decrement calibration approaches, which each use the same methodology and offer various levels of risk in line with investors’ objectives and needs, for a resulting initial product suite of 69 indices.

The decrement dividend approach has been used within the global or regional equity index space previously, but this launch represents the first time that the technology is imported with scale into the single stocks used as structured product underlyings, in particular within autocallable payoff structures. The decrement mechanism involves deducting a pre-determined amount in absolute or percentage terms from the underlying’s total return performance on a daily basis — a sort of fixed, synthetic dividend detachment. By selling a structured product based on a total return index with a decrement, the issuer eliminates the unpredictability of dividends and is protected against any dividend shortfalls. The structured product investor in turn may receive better pricing.

“We consider these indices to be the next evolution for the global structured product market. This initial series of 69 indices over 23 of the most-utilized single stock names in European and US markets has been created as a more pricing-efficient way to gain exposure to those companies within structured products, leveraging on a well-thought-out and robust framework for the decrement calibration. This efficiency reaps benefits for end-investors, as well as distributors and private banks, as it enables manufacturers to generate more attractive risk-return profiles because of the dividend treatment,” said Alexandre Isaaz, Global Head of Equity and Hybrids Payoff Structuring at Citi. “As a product manufacturer, we are committed to consistency and longevity in the structured product market, and approaches like this series enable us to facilitate ongoing demand, particularly in congested markets.”

The decrement calculation and index management is facilitated by Qontigo. “Our ambition is to create effective and efficient index solutions for each individual need, and the Single Stock Decrement Indices are a good example of that,” said Armelle Loeb, Head of EMEA Sell-Side Sales at Qontigo. “We are very pleased to have worked with Citi at such a challenging time for the industry, in delivering a transparent and robust methodology to their structured-product clients.”

Further information can be found on the STOXX website.

Note: This press release is for information purposes only. Investors should read the full terms and conditions of the Indices (available on the STOXX website) and the relevant product documents in full prior to making an investment in any product linked to the Indices. Investing involves risk and any evaluation of an investment should be made after seeking advice from independent professional legal, tax, accounting and other advisors. The Indices are published, compiled and calculated solely by STOXX Limited, and all the information in respect of the Indices is provided by STOXX Limited only. The Indices are not sponsored or endorsed by Citi.

About Citi

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