Editor’s letter



The structured products market is too fragmented, tainted by bad press and in need of direction. That was the message delivered by Bankhall, the UK’s leading IFA consultancy, at an industry conference in London last month. One proposed solution was to establish a structured products association for the retail distributors, which could help drive standardisation and serve as a forum for regulatory debate. Another suggestion was to establish links with other professional bodies to increase IFA education about structured products.

Both ideas have merit, and getting the IFAs ‘on side’ is certainly important. But the industry may have even more urgent concerns to address. Pension funds, for example, look as if they are still in need of some persuasion.

One of the best known pension consultancies, Watson Wyatt, says that the use of constant proportion portfolio insurance (CPPI) – where asset allocation is adjusted in response to changes in market conditions with the goal of protecting capital – could prove to be an attractive technique for pension funds. This may well prove to be the case, but pensions funds are likely to require a lot of convincing, as Stephen Lowe, London-based head of asset strategy for Railpen – the investment arm of Britain’s Railways Pension Scheme – points out (see p.17).

This, in turn, takes us back to the question of education. How can we expect IFAs, or distributors, to sell these products to pension funds or the mass affluent if education is lacking? Thankfully, some organisations have picked up on this alarming trend. Hedge fund-linked products targeted at the retail market could take off, but only if more companies start to behave like Tilney Investment Management, which organises training seminars for professional advisers.

And if more people adopt this approach everyone could be a winner: investors will be comfortable in the knowledge that their IFA is ‘tuned in’ to new investments; IFAs will be able to offer their clients a more extensive range of services; distributors will enjoy some healthy sales; and last, but not least, structurers at investment banks will be busy for years to come.

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