CSP Structured Products Guide

Introduction

T he investment universe can be very daunting, withmany ways to invest to ensure that your savings performandmatch your needs and requirements, whilst accepting an element of risk to help you on your journey. As Independent Financial Advisers we look across all investment markets to develop an understanding of what is good, or maybewhat is less good, as we seek to deliver attractive returns for our clients commensuratewith their chosen risk appetite. Leaving aside the vastness of thewhat is ‘out there’ to invest in, if therewas any area that we at Lowes pride ourselves in, it is around the understanding and knowledge of the structured product sector, having invested the time and effort over more than two decades to become one of the sector’s leading commentators. Notwithstanding the exceptional performances of the sector in recent years, 2020 has represented another successful year for retail structured products, despite themarket turmoil inflicted at the hands of the coronavirus pandemic. 69.36%of maturities in 2020 achieved a positive result for investors, with just 6.81% realising a capital loss – a further 23.83% still returned investors original capital in full. Fewother investment sectors could boast the same over that same period. The unique selling point of structured products is that whilst their returnsmay be driven by the performance of major stockmarket indices, the relationship is not necessarily direct, meaning that it is possible tomake a returnwhen other, more correlated investments are not. Furthermore, any potential return is almost certainly pre-definedwithin known market parameters; youwill know if the stockmarket does X, youwill get Y and so on; few other investments operate in such a transparent manner. Structured products have been around in one formor another for over forty years, and whilst there has been some negative commentary around certain specific, unfortunate events, we at Lowes consider the sector to be in good health and consistently demonstrating a positive impact on our clients’ portfolios. However, it would be remiss of us not tomention perhaps two recent events, albeit both happening over ten years ago, whichmarked out the sector for comment. The first would have been the failure of Keydata Investment Services in 2009, which at the time was a leading provider of structured products, however their failurewas the result of activities they conducted away fromwhat wewould consider to bewithin the structured product arena. Unfortunately, the headlinewriters of the day didn’t quite capture this and structured products became tainted by association. It is worth adding that even though Keydata failed, their structured products whichwere in force at the time, continued and ultimately produced excellent results.

1 Lowes Structured Product Annual Review 2021

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