PARIS (HedgeWorld.com)–In the next couple weeks, officials are expected to finalize a deal with Zurich Financial Services to transfer a substantial portion of Zurich Capital Markets, New York, structured products business to BNP Paribas.
According to a spokeswoman, BNP Paribas’ directive was to expand activity in the United States, adding structured products linked to alternative investments. More specifically, those products are linked to funds of funds including possibly hedge funds, a spokeswoman said. The deal includes intellectual property and hiring of support staff.
Officials at Zurich, Switzerland-based Zurich Financial Services were not able to offer much more detail about the transaction but said that it was a substantial portion of Zurich Capital Market’s assets. The decision to sign a letter of intent to sell the structured product business at ZCM is in line with the overall Zurich strategy to focus on its core insurance activities and to divest this particular business line.
Late last year, ZCM started to move away from the structured finance transactions that are so dependent on ratings, according to a Zurich spokeswoman. As Zurich’s ratings were lowered, it ultimately affected the firm’s structured finance business, she added. Going forward officials are expected to focus more on asset management.
The capital markets segment of the Zurich’s business has been hard hit in the last year. According the Zurich’s annual report, the capital markets and banking segment, which includes Zurich Capital Markets, recorded a loss of US$125 million in 2002, compared with a net income of US$89 million in 2001.
Also in line with increasing its focus on insurance was Zurich’s sale of its asset management subsidiary Threadneedle Asset Management, London, to American Express Financial Corp., Minneapolis. Threadneedle manages US$1.1 billion in hedge funds and US$75 billion overall but will continue to manage assets for Zurich for up to eight years under terms of the deal that is expected to close in the fourth quarter .
For BNP Paribas, the deal brings with it recognition in the United States as a player in the U.S. equity derivatives market. Well-known in Europe as a provider of structured funds of funds, the firm’s business has been growing rapidly, with a number of deals already completed this year. In April, BNP Paribas launched the BlueX Index-Certificate I with Benchmark Capital Management GmbH Previous HedgeWorld Story.
The firm also has become active in Canada, as a guarantor of structured notes. In May, BNP Paribas (Canada) agreed to provide the principal repayment guarantee at maturity plus any appreciation in the value of the Arrow Multi-Strategy Notes Series I, an offering from Arrow Hedge Partners to Canadian retail investors Previous HedgeWorld Story.