Editor's letter

Markets in Asia-Pacific are feeling the strain and European markets are recording lower issuance volumes, but the US market refuses to stem the tide of structured products issuance. The latest version of the story of Asian structured products has already been told and remarked upon. In brief, a market that was flourishing last year is starting to wilt. Perhaps the only thing to add is that the limited number of products and a belief on the part of buyers that short-term products will always provide healthy profits has left investors short of options.

Asia-Pacific is a young market and its current plight highlights more than ever the need for a greater variety of longer-term products - so perhaps the dominance of conventional accumulator and range accrual products could be coming to an end.

In Europe, the mood depends on which country you are in. But it is fair to say that volumes are the same as last year in a few of them and as much as 40% down in others. Although private bankers and distributors in the UK say investors are becoming more cautious and are spending less, the distributors we questioned for the Spanish survey that appears in this month's magazine were broadly positive about the future of their section of the European market.

Talk has it that structured products are close to entering another heyday as the phrases 'guarantee' and 'principal protection' begin to resonate with nervous investors. The reality, however, appears to suggest that the transformation of investors from risk and yield-hungry beings to a more rational and sensible mindset will take some time.

While this happens, it could be that all of those pundits applauding the availability of funky new underlyings might find themselves taking just a little more interest in the payouts, which would mean that the hottest bet for this year - that underlyings will dominate - could already be wide of the mark.

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