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All But One Of The Structured Products Maturing In The First Quarter of 2015 Return a Gain

Ian Lowes - 14/04/2015

Please note – past performance is not a guide to future performance

All of the 117 products distributed through the Independent Financial Adviser space that matured in the first quarter of the year made a gain, bar one which returned the original capital, according to figures from research site CompareStructuredProducts.com.

CompareStructuredProducts.com, run by Newcastle-based adviser firm Lowes Financial Management, gives investors the opportunity to research and compare structured products ordinarily available through Independent Financial Advisers, and invest where appropriate. Maturity figures are collated periodically to give insight into product performance.

The average annualised gain of products maturing in the first three months of the year was 7.14% over an average term of nearly four years. The first quartile of products made an average annualised gain of 10.51%, while the bottom quartile made an equivalent of 4.68%. The average total gain of all products was 31.19%.

The best performing maturity in the quarter was the Morgan Stanley FTSE Kick Out Growth Plan 15, which matured on its third anniversary returning a 60% gain because the FTSE had risen 10%. Investors would only have lost money if Morgan Stanley had gone bust or the FTSE didn’t rise by 10% and at the end of six years was below 2945 points.

The only investment that didn’t return a gain was a Barclays product linked to iShares MSCI Emerging Markets Index Fund, which fell by 1.78% over the five-year term, and so the plan, being Capital ‘Protected’ returned the original capital without a loss.

Deposit based products made an average annualised gain of 5.49% over an average term of 4.47 years, while Capital ‘Protected’ products made the equivalent figure of 5.82% per annum over 5.23 years. Capital at Risk products, which offer higher returns by putting capital at risk, made an average annualised return of 8.37% over an average term of 3.42 years.

The FTSE 100 was by far the most common underlying measurement used, accounting for 88% of the maturing products, with a healthy average annualised return of 6.88% over 4.14 years. This figure includes the returns generated by all product types and so will naturally be pulled down by Capital ‘Protected’ products and Deposit Based products that provide capital protection as a tradeoff for a less attractive reward profile than Capital at Risk products.

The 53 Capital at Risk products linked solely to the FTSE 100 made an average annualised gain of 8.01% over an average term of 3.65 years. This was greater than that of the Capital ‘Protected’ products generating average annualised returns of 6.15% over an average term of 5.19 years and Deposit Based products made 5.49% per annum over 4.47 years.

Even the bottom 25% of the FTSE 100 linked Capital at Risk products produced annualised gains of 5.98%, while the top 25% made 10.89%. This result is impressive given the market protection built into the products and shows the range of risk profiles within the Capital at Risk products themselves.

The non-FTSE 100 linked products represented a wide range of payoff profiles and underlying measurements. The average annualised return of the 14 products was 9.04% over an average term of 2.86 years. The first 25% of the products made an average annualised return of 12.01%, while the bottom quartile made 4.97%.

CompareStructuredProducts.com founder Ian Lowes says: “There has been some negative headlines recently around investors overestimating the returns of structured products, specifically structured deposits. Whilst we can’t speak for the high street distributed products (other than to say that we have frequently identified them as poor value), products distributed through the IFA space have done little but impress as of late.

The latest maturity figures show the positive results generated by a range of structured product types with different risk profiles and underlying measurements. When chosen selectively in the context of an investor’s attitude to risk, structured products represent a valuable diversifier to portfolios with their in-built market protection and defined outcomes.”