Structured products shine during volatile times

Research has found no structured products distributed by UK intermediaries matured with a loss last year.

No structured products distributed by UK intermediaries matured with a loss last year, research has found.

According to Lowes Financial Management, which analysed the 381 structured products that matured in 2018, not a single ‘capital at risk’ product that matured in 2018 produced a loss, despite the wild swings seen across financial markets.

In total, just 23 products (6.04%) returned capital alone, while the remaining 358 (93.96%) generated positive returns, with an average 6.33% gain across all structured products. Of the 23 products that did not return a gain, all but two were deposit-based or capital-protected contracts and they were, with one exception, linked to measures other than mainstream indices.

Ian Lowes, managing director of Lowes Financial Management, says: “Despite significant volatility in markets in 2018, the last 12 months have been fantastic for structured products. It is great to see the sector continuing to deliver.”

Among the best-performing structured products last year was Investec’s Dual Index Step Down Kick-Out Plan 9 (Investec Option). Linked to the FTSE 100 and the EURO STOXX 50, it delivered an annualised return of 11.6%.

The Mariana 10:10 Twin Option FTSE Kick Out Plan, created in cooperation with Lowes and launched in October 2015, was also among the top performers, with a gain of 37.5% after three years, which equated to an annualised return of 11.2%.

Lowes adds: “Once again we have seen some standout performers in 2018, but without a doubt the biggest achievement for the sector is that our 'Black Hole' award, given to the worst structured product to fail investors, was empty this year as no products produced a loss.  This is the first time this has happened.”

As Money Observer pointed out in the October 2018 edition of our magazine, structured products have their merits and demerits, but at a time when stock and bond markets look largely unattractive, they are an option to consider. That’s particularly the case for income-seekers keen to bring some clarity to when, and in what circumstances, income will be paid, which is why structured products have a useful role in a diversified portfolio.

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