With equity based investments back in demand, structured products are once again attracting investors, although concerns about liquidity mean transparency and simplicity are at a premium.
Growth and income plans were by far the most popular style of product over the past three weeks, thereby disproving the prediction that autocall products would increase in popularity.
The latest US issuance is much larger than usual, although, as with a lot of the US offering, reverse convertibles issued by Barclays make up the majority of the products issued. A good portion of these are based on gold, which continues to be an attractive sector.
After deviating into a variety of product structures in recent issuances, the US market has returned to its love affair with the reverse convertible in the latest offering. One of these, issued by Barclays, is based on the MSCI Brazil Index Fund.
Structured product providers are bullish that the recent growth in the sector will be maintained throughout the economic recovery as the products finally shake off the tag of ‘foul weather friends’.
Investors continue to buy capital-protected products, but shy away from leverage.
There is a focus on the US indexes emerging in the offerings this week, with the latest including several products that use the S&P 500 and Russell 2000 as an underlying. This trend comes as the dollar is strengthening and there is uncertainty about some of the emerging markets economies.
UBS AG sold $23.5 million of one-year structured notes with returns based on the performance of a rules-based currency-trading strategy.
How much can investors earn if their national football teams perform well at the Fifa Football World Cup? Buy a structured product based on the fortunes of your favourite team and find out, some experts advise.
Funds are growing in popularity across the globe as investors who are still wary following the financial crisis look for transparent and liquid investment vehicles. The increase in fund investments was verified for the UK market this month by data from Barclays’ stockbrokers. Recent months have seen renewed investor confidence in funds and April saw the highest funds trading on record.