Regular readers will know that I have soft spot for structured products. My sense is that these have moved from being lightly questionable products in the earlier part of this century to mainstream alternatives to the absolute returns/defensive funds space. The industry has well and truly cleaned up its act and started turning in some very respectable numbers. Evidence for that came in this morning in the shape of ‘The Review of the Decade’, produced by Lowes Financial Management, which compiles research into the significant positive steps for the UK structured products industry has made over the past decade. The Lowes Structured Product Review of the Decade can be downloaded from Lowes.co.uk/spdecade. Here are some of the headlines form the report for the period 2010-19:
- 4,444 – structured products issued.
- 3,895 products matured.
- 2,467 maturities were capital at risk plans
- 60 (1.54%) of all maturities returned a loss
- 3 years, 9 months average investment duration
- 7.84% – average annualised return from capital at risk products
- 3.64% – average annualised return from deposit-based products
- 5.56% – average annualised return from income plans
Key findings include:
• Autocalls have grown to dominate the sector
• There has been a wholesale transition to simple, end of term capital protection barriers
• A move to longer maximum duration autocalls has repositioned market risk
• Higher risk plans are now extremely rare