The US structured products market is in the ascendance. Slowly but surely the investing public is taking to structured products and more and more institutions are throwing resources at building up a business. Still, however, the US market, in both size and maturity, lags behind the industry in Canada. Next month we will report extensively on trends in Canada, a country where hedge fund products in particular appear to have caught investors' attention.
Although the US market is still effectively playing catch-up with Europe, there is no shortage of innovation. Hedge fund products are just one of the areas which structurers and distributors alike appear to be excited about and last year witnessed a significant increase in the sale of reverse convertibles with soft protection and the introduction of commodities as an underlying. What's more, hybrid products are also hotly tipped for success in the region, according to delegates at last month's Structured Products Association (SPA) meeting in New York.
It may be a hard sell though. After all, how can we expect US investors, entrenched in a simple equity culture, to embrace complex hybrid structures? As we report on page 24, some US wealth advisors still view structured products as 'gimmicky.' The perception formed by many, it seems, is that capital-guaranteed products are essentially too conservative for the majority of affluent Americans.
Then again, successful hybrid offerings in Europe could convince a few Americans that in the search for yield, multi-asset products are the way forward. Anglo Irish Bank, for one, has announced the launch of Privilege Multi-Asset Bond primarily to meet demand from its IFA and private client customers for both shorter-term products, and 'sexier' underlyings, in the form of a four-year, sterling-based, capital-protected product paying 180% of the average rise of the FTSE 100, crude oil and sterling versus US dollar rate.
Continued replication of European products would be bad news for the US market, however. So here's hoping that the hybrid hopes espoused by so many at the SPA event will become reality.
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The week on Risk.net, July 7-13, 2018Receive this by email