Marex Solutions trades world’s first Tier 2 structured note

July 8, 2020

Marex Financial Products, the structured notes arm of commodities specialist Marex Spectron, has issued the first ever Tier 2 Capital Structured Note.

The Swiss Franc subordinated note is 100% principal protected and provides both an annual coupon of 2.55% plus upside participation in the Swiss Market Index at maturity. The 5.5 year note was created in partnership with two investment banks and law firm, Hogan Lovells.

With negative interest rates across the world, investors have struggled to find meaningful positive yields. At the same time, extremely resilient equity markets mean that anyone who didn’t invest in equities in the last decade missed out on very large gains. Marex has created a product that can simultaneously provide high interest rates plus exposure to any growth in the largest Swiss equities. In addition, 100% of the principal is protected. The notes qualify as Marex Financial Tier 2 Capital and are approved by the FCA.

By combining flexibility of a structured note and the additional yield through subordination, Marex was able to create an attractive financial instrument. A first-of-a-kind innovation which has already proved popular with professional investors.

Jochen Seitz, Partner at Hogan Lovells commented: “We are delighted to have supported Marex on this Tier 2 programme which allows Marex to tailor products pursuant to the needs of investors and at the same time provides funding for capital purposes.”

Joost Burgerhout, Head of Marex Financial Products, added: “As investors are increasingly looking for yield, our subordinated program offers an appealing alternative to classic structured notes. In an environment with near zero or even negative interest rates, providing a note with an attractive yield and a market-linked participation makes an alternative option for investors looking for a regular income and the potential to benefit from the increase in the equity markets. This is our first tranche of a limited number we will issue under this program and plan to issue more in 2021.”

Nilesh Jethwa, CEO of Marex Solutions, commented “Covid-19 has created unprecedented uncertainty and investors are increasingly concerned about capital preservation. With record fiscal and monetary stimulus, they are now also struggling to earn positive yield and are worried about missing any long-term equity rally. This new type of instrument allows them to preserve their principal, have a meaningful annual income and retain exposure to any equity upside. We’re grateful to our partners, in helping us break new ground.”

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