A downward spiral?

Activity in the Italian structured products market has slumped as a result of retail investors getting burned by the insolvency of Lehman Brothers, as well as the wait-and-see stance of investors common across Europe. As investors gradually move their money out of low-yielding cash accounts, it appears that Ucits III-compliant mutual and exchange-traded funds will be the favoured vehicles, but arrangers still believe that structured products have a role to play. By Michael Marray

During 2006 and 2007, Italy was a major source of business for structured products arrangers, as retail investors flush with cash and riding the upward run in real estate prices looked for capital guaranteed products with payoffs on everything from commodities to foreign exchange and emerging markets equities.

But activity has since slumped even more dramatically in Italy than in other European markets. One banker estimates that sales of structured products were down by 80% in the first quarter