Editor’s letter



Good news for distributors and structurers: Britain’s wealthiest investors have something of a love affair with structured products. That’s according to a survey published last month by London-based Tulip Financial Research, which found that structured products are the fastest growing asset class for high-net-worth individuals in the UK.

Nevertheless, Tulip has only found that investors are demanding fresh and exciting products. Indeed, continued growth of the market can only be guaranteed if structurers and distributors pledge to innovate.

Thankfully, if recent launches are anything to go by, it looks as if innovation is alive and well. And tight corporate credit spreads are forcing dealers to come up with new ways to offer retail investors the chance of a decent return. As a result, structures linked to credit derivatives indices using constant proportion portfolio insurance (CCPI) to gain leverage are now hitting the market (see page 14).

It all sounds terribly complicated, but the structurers could well be on to a winner. Then again, new products must fit into the changing regulatory regime. Memories of the precipice bond scandal are also alive, if not well. And, as we report in our cover story, everyone involved in the structured products market must now take extra care when it comes to marketing their products – whether they are complex or not.

Marketing practices have certainly changed since the “free lunch” of the late 1990s. But regulators are still keeping a close eye on what firms are up to. And it looks like 2005 may see further marketing restrictions. Consob, the Italian regulator in charge of structured products, is, for example, making it compulsory for all product prospectuses to include a table containing probabilities of certain payoff profiles, generated using stochastic analysis. Such requirements will inevitably lead to increased workloads.

With this in mind I hope you all make the most of this holiday season. Merry Christmas and a Happy New Year to one and all.

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