It's official: structured products are the best way for investors to tap commodity markets. That's according to a UK Financial Services Authority study last month which pointed out that structured products are the typical way for wealth managers to gain access to commodities as an investment class. The paper, "Growth in commodity investment: risks and challenges for commodity market participants", cites the example of a private wealth manager who told the regulator that its clients are showing increasing interest in commodities, with between 3% and 7% invested in the sector.
Investors have chosen structured products as their access route due to the opportunities provided by capital preservation. Conservative approaches to investments make sense when considered as part of an overall portfolio - the need for protection should be married with some riskier strategies. This sentiment is hardly rocket science, although it's an outlook that has often been ignored in some countries, and this was a point I made at a speech at the Istanbul Stock Exchange last month.
I was speaking at an event sponsored by Fortis and attended by some 150 investment bankers and retail distributors, which marked regulatory approval of structured funds in Turkey. Turkish investors, it was argued by various speakers, will take to derivatives-based investments as a way for portfolio diversification. But more of that next month ...
My point is that across the world there has never been a more exciting time for structured products. Investors are beginning to recognise the benefits of capital preservation strategies, and that the opportunities provided by structured products for accessing markets that were previously closed to the average person on the street are second to none.
This month, we celebrate innovation across the Americas with our awards for that region. When Structured Products was launched in October 2004 it was hard to imagine retail investors in the US gaining access to products that were even vaguely innovative. But that situation has changed dramatically, as our awards make clear.