In early July, European Central Bank president Jean-Claude Trichet warned banks to up their focus on hedge fund risk. Market participants usually rant about such pronouncements and then fail to react. But the hedge fund industry appears to be taking his concerns seriously. The Alternative Investment Management Association, for example, is setting up working groups to establish a code of conduct to alleviate investor concerns and boost market confidence.
Structured products professionals could learn a thing or two. Speaking at a conference in New York at the end of June, Thomas Handler, chairman of the advanced planning and family office practice group at Chicago-based boutique law firm Handler, Thayer & Duggan, noted that one of the biggest challenges facing the structured products market in the US is the threat of burdensome regulation. Pointing to examples of mis-selling in Europe, Handler said that the US market – and indeed the global market – would do well to learn from such experiences and act now as an industry to develop best-practice guidelines. Handler also encouraged delegates to increase educational efforts so that investors can fully understand the risks associated with their investments.
The form that these best-practice guidelines might take is anyone's guess. Thankfully, though, it appears that the wider financial community, in the UK at least, is gaining confidence when it comes to structured products. As we report on page 10, the majority of the UK's IFAs are embracing structured investments, refusing to let the precipice bond debacle cloud their judgement when advising clients.
Another finding of our first survey, however, is that IFAs – if not most market participants – would like a standard rating system for structured investment products. Again, it's unclear how, and if, a 'kite-marking' approach would work. Structured Products is keen to keep you informed about such developments, so read our September issue to find out if we can expect to see widespread ratings in the near future.
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The week on Risk.net, July 7-13, 2018Receive this by email