New analysis from Lowes Financial Management reveals that structured products have been one of the most consistent performers for investors since the financial crisis of 2008.
According to the results of The United Kingdom Structured Product Sector Review, which analysed 4,398 structured products issued between January 2009 and December 2018, nearly every product returned at least the investor's initial capital, with 88 percent producing a positive outcome.
The report also outlined that the sector as a whole returned an average annualised return of 6.23 percent, with only 1.55 percent maturing in the time (57 of the 3,670) resulting in a loss.
The consistent performance is indicative of the reliable gains produced by FTSE 100-linked products, as only five such products produced a net loss in the 10 years from the start of 2009 to the end of 2018.
A number of key trends have appeared over the past ten years which explain the performance of structured funds. One which is attributed to the consistency of structured funds is the increase in autocall products issued, which offer multiple opportunities for the product to mature and consequently produce a gain if the required market performance is produced.
Alongside this increase in autocall products during the ten-year period, there has also been an increase in products issued with extended term lengths. In 2009, three quarters of autocall products issued had maximum terms of less than six years. By 2017, all autocall products had a maximum term of at least that length.
Meanwhile, the counterparties active in the structured product sector across the UK has also changed since the financial crisis. The range has diversified since Barclays exited the sector, having previously accounted for a quarter of products issued in 2009. Although long-standing name Investec is still party to 36 percent of all issuance in 2018, banks such as Credit Suisse, Goldman Sachs, HSBC, Morgan Stanley and Société Générale now account for sizeable shares of the market.
Ian Lowes, managing director at Lowes Financial Management, who launched the Lowes UK Defined Strategy Fund, believed that structured products have been much more in the last ten years, and a much more consistent performer for investors than previously suggested.
He said: “Some people have been wary of the sector since its early days, but the numbers speak for themselves. Not a single product matured with a loss in 2018 and only five FTSE 100-linked products matured with a loss since 2009. The sector has consistently produced steady and predictable gains, which have helped our clients achieve their financial goals.”
Mr Lowes added: “Structured products have come on in leaps and bounds, and we firmly believe the future of the structured products is in an easily accessible UCITS vehicle, such as the Lowes UK Defined Strategy Fund.”
Lowes Financial Management Ltd manages almost £1bn of assets, investing over £380m into structured investments on behalf of clients.
