26-04-2022 10:50

Nasdaq celebrates 10-year jubilee of Nordea’s Credit Linked Note, Fasträntebevis

What better way to celebrate a milestone than an iconic bell-ringing ceremony at Nasdaq? On the 25 April, Nasdaq in Stockholm rang its bell to mark the 10-year anniversary of Nordea´s Credit Linked Note (Fasträntebevis).
Nasdaq rings the bell to celebrate 10-year jubilee of Nordea’s Credit Linked Note, Fasträntebevis

In Sweden, there is a longstanding tradition of investing in equity, both directly through shares and indirectly through investment funds. However, if an investor wants less risk than that of a 100% equity portfolio, a common alternative has been to place funds in a regular deposit account. While a safe option, deposit accounts have historically generated relatively low returns over time.

Back in 2012, the Structured Products team at Nordea Markets saw a gap to fill in the spectrum of financial investment alternatives and launched a new structured product, the Credit Linked Note (CLN), or Fasträntebevis, as an option for diversification.

Today, 10 years on, Nordea has launched over 100 different Fasträntebevis with exposure to more than 50 different companies, covering a full range of credit risk exposures.

Just in time for the 10-year jubilee, interest rates are picking up, giving a boost to the expected return of this type of product.

We see a stronger demand for Fasträntebevis and other general structured products.

Mathias Lundberg, Director of Structured Investments, Nordea Markets

Key drivers

One of the key drivers of the Fasträntebevis is that it is offered directly on the exchange while other structured products are sold through an initial subscription period. With the exchange as a distribution channel, the product is cost efficient to distribute and quick to introduce to the market. This has enabled Nordea to provide clients with a significant number of different Fasträntebevis over the past 10 years.

Another key characteristic of the product is that it is traded in the denomination of SEK 10,000, making Fasträntebevis accessible to the broad public. The product has served well as a complement to traditional equity investments and as an easy way to spread risks.

"In the last 10 years, we have delivered more than 100 different Fasträntebevis to our clients with different risk levels,” says Mathias Lundberg, Director in Structured Investments at Nordea Markets. “It has been a big success and well received by the market. We see a stronger demand for Fasträntebevis and other general structured products."

Credit Linked Note (CLN) - Fasträntebevis

CLN is linked to the credit risk in a company or an index. For example, the Fasträntebevis on Volvo Cars is linked to the credit risk in Volvo Car AB. For an index, it is linked to the credit risk of the companies included in the index. In addition to the credit risk in the underlying company or companies that the product is based on, an investor also faces credit risk of the issuer Nordea Bank Finland Plc.

Each Fasträntebevis has a fixed term, normally five years at the time of issuance, and one of the key characteristics is that it offers a fixed interest payment. The interest is paid on a quarterly basis and usually, a high interest rate reflects high credit risk. A benefit of the fixed interest rate is that the investors will know what amount to expect to receive each quarter. If no credit event has occurred during the term, the nominal amount for each Fasträntebevis is paid back to the investor at maturity, in addition to the quarterly interest rate payments.

CLN (Fasträntebevis) is one of the products offered by Securities Finance, Structured & Equity Trading unit within Nordea Markets.

Insights
Corporate insights