Monthly Performance Update - August 2015
12th August 2015With commentary from David Stevenson
I've invested in structured products on and off for at least the last ten years, in funds and in listed products. Some of these investments have been a success, others less so - like any other investment, the outcome very much depends upon the robustness of the underlying idea (or asset class) and the exact details of the product used. This variability is of course to be expected but in the world of structured products, that wide range of outcomes presents an additional challenge. Structured products all have their own relatively unique characteristics, based on the issuer, the payout profile and the risk level. This variety has traditionally made comparing structured products with other investment products such as mainstream unit trusts or even exchange traded funds problematic - critics of structured products have long been able to point to the failure of a few individual plans and suggest a systemic failure, yet the industry has had relatively few studies to fall back on to suggest otherwise. In simpler terms, structured product providers have been ill equipped to counter criticism with any wider statistics looking at aggregate, across the board, returns from a large cohort of plans.
Again, my own experience might help explain this predicament. I've long thought that Kick Out products have real utility for those investors concerned about the potential for sideways tracking stock markets. The structure of Kick Outs allows a fairly robust capital gain even if markets such as the FTSE 100 were to go nowhere for extended periods of time. The challenge from a number of a journalistic perspective is to prove this intuition - one needs hard numbers from a big enough sample size to make any comment.
The industry association, the UKSPA, has now provided the first building blocks for those investors looking to properly compare different forms of structured products with other investment options, including unit trusts. The key to this quantitative led approach has to be performance-based statistics, preferably for a robust period of time. Go to the UKSPA website and one can now see returns for a relatively long list of structured product types varying from protected income structures through to uncapped, non-protected growth structures.
Download the full Monthly Performance Update here.