Structured Products Defy Market Volatility to Deliver Strong Returns in 2015

Structured products can offer protection from market turmoil

In what was generally a tough year for investors in the FTSE 100, all of the structured products that are linked to the UK’s blue chip index matured with a gain in 2015, and only one product linked to any market that matured during the year cost investors money.

Structured products offer private investors the chance to invest in the future direction of a particular market without buying the shares. So an investor can for example, look at the level at which the FTSE 100 is trading today, and invest in the market rising above a certain level, or not rising above a certain level, at fixed dates into the future. For many private investors, having allocated capital to funds that do well when the FTSE rises, a structured product that can perform is the market does somewhat less well is an interesting diversifier. 

All the FTSE 100 linked structured products made positive returns for investors, while the top 25 per cent made annualised returns of 9.49 per cent. The bottom quartile of FTSE-linked products delivered an average annualised returns of 4.28 per cent.

Ian Lowes, founder of comparestructured products.com told What Investment, ‘Looking at all products maturing in 2015, out of the 424 IFA distributed products, only 8 failed to produce positive returns with only one of these delivering a loss. In the year that the FTSE 100 fell by 4.67 per cent, all of the 347 IFA-distributed structured products linked solely to this index of the UK’s largest companies made a gain for investors.’

These on average made annualised gains of 6.59 per cent over an average term of just over four years, compared to the average return of less than per cent from the FTSE 100 Index and 4.54 per cent for the IA Protected sector over the same durations.

The average return per annum of the top 25 per cent of FTSE 100 products was 9.49 per cent.’

He continued, ‘Even the bottom quartile of FTSE-linked products delivered an average annualised returns of 4.28 per cent.’  

The data also holds up over a longer period of time, over the past five years,
looking at all products maturing over the five years to 31st December 2015, out of the 1875 IFA distributed products, nearly 98 per cent of products (1833) made a gain for investors or returned capital only, while only 2.2 per cent, or 42 products, made a loss. - whatinvestment