Structured products bonanza

After a rapid growth last year and a flurry of fund launches this month, structured product providers believe 2010 will see the asset rise in popularity among the intermediary community.

Launches so far this year have included: Legal & General’s FTSE Growth Plan 2  and FTSE Early Bonus Plan 2, Cater Allen’s Capital Guaranteed Income plan and Jubilee’s Regular Income plan.

Financial Express data suggest 24 products opened in the month as of 25 January, with 74 products overall scheduled to remain open until 29 March. 

Structured Products issues closing January 2010

Product	Date
Walker Crips Structured Investments The Four Year FTSE100 Deposit Plan	27-Jan-10
Barclays Wealth UK Accumulator December 2009 Edition	29-Jan-10
Investec 5 Year FTSE100 Kick Out Plan 9	29-Jan-10
Investec FTSE100 3 Year Deposit Plan 14 - Option 1	29-Jan-10
Investec FTSE100 3 Year Deposit Plan 14 - Option 2	29-Jan-10
Investec FTSE100 5 Year Deposit Plan 14 - Option 1 (Investec version)	29-Jan-10
Investec FTSE100 5 Year Deposit Plan 14 - Option 1 (Lloyds version)	29-Jan-10
Investec FTSE100 5 Year Deposit Plan 14 - Option 2 (Investec version)	29-Jan-10
Investec FTSE100 5 Year Deposit Plan 14 - Option 2 (Lloyds version)	29-Jan-10

Source: Trustnet.com

Analysis from Blue Sky Asset Management suggests UK retails sales of structured products grew by 47 per cent in 2009 to £13.3bn with total asset under management (AUM) now standing at £39.4bn.

Gary Dale, head of intermediary sales at Investec Structured Products describes the number of new entrants to the market so far this year as "incredible", and says he expects to see market growth continue through the rest of 2010.

"There was a big slowdown after the FSA released their papers on Lehman Brothers last year. However, I would have thought this year we should expect an £18-£19bn growth across the whole market, if we see less than this I will be surprised," he says.

Dale says he foresees structured funds becoming more prominent and expects the number of funds to carry on rising.

Morgan Stanley will be among those launching new funds this year, with a proposed new UCITS III fund being launched towards the beginning of March 2010.

Marc Chamberlain, executive director, UK Structured Solutions, Morgan Stanley agrees the future for the structured product market is looking good and says attitude has improved since the formation of the Structured Products Association in November 2009.

This is enforced further by Dale who says attitude among investors towards structured products is changing after the inspection of the sector by the regulator last year.

"I think the FSA muddied the waters slightly on the basis that their guidance has been interpreted as fact and we have had to re-educate people," he explains.

Dale says the upshot of this is that when the structured products market comes through this, which he predicts will be in the first-quarter of the year, he believes more advisers will understand where they stand with the products.

"The credit risk issue has gone now, advisers understand due diligence and the FSA have helped that. Once you get round the diversification issue I think you will see more and more advisers using structured products."

Colin Jackson, director at Baronworth Investment Services, favours structured products, because he says they suit his client base of predominantly income seekers.

"They are looking for a known level of attractive income, they are prepared to take some level of risk with their income and they are prepared to tie their money up for say five years, so structured products fit the bill."

Adviser Fund Index panellist Graham Toone, head of Investment research at AFH says the structured products market is one being studied at as an alternative to investing in corporate bonds.

"With interest rates likely to go up we feel a bit concerned about the corporate bond and gilt market and are not sure what alternatives we have for that space. Structured products have an attractive yield without being exposed to the same degree of risk in the fixed interest market," he says.