Rediscovering risk

Fixed-income structured products performed poorly in Italy last year, while inflation-linked business appears likely to cool in 2006. As a result, Italian equity-linked certificates are poised to benefit as retail investors seek to increase their exposure to buoyant equity markets and take on more risk

Italian retail investors did not have a particularly good 2005. Most investors who betted on the yield curve steepening and ploughed into constant maturity swap (CMS) products, last year's biggest selling product by far, have been left with mark-to-market losses as the yield curve flattened in the latter part of the year. Other products, such as Snowballs - which bet on short-term rates remaining at low levels - also performed poorly when short-term rates rose.

Participants feel that, under the