Structured Products Annual Performance Review 2022

UK Structured Products Sector Maturity Analysis Covering all intermediary distributed retail products that matured in 2021

Welcome to Lowes Financial Management’s Annual Performance Review 2022, which provides a thorough overview of the retail structured product sector covering all retail structured products that matured in 2021 . 2021 represented another unprecedented period for investors and the public more generally, with the hangover from 2020 continuing to linger. The entirety of Q1 was spent under a national lockdown, with the partial lifting of restrictions in April preceding ‘Freedom Day’ in July. The FTSE 100 Index has enjoyed significant recovery broadly aligning with the lifting of restrictions, albeit remaining below pre-pandemic levels. In 2020 the pandemic market correction impacted autocalls as the lower market position meant that many potential maturities were deferred until later observations. In 2021 the market uplift, particularly in the second half of the year, meant that a significant number of these autocall contracts matured with a higher gain that they would have realised the previous year. We are happy to reflect on another positive year for the sector, seeing significant improvements from last year’s review. In 2021, 529 plans matured returning an average annualised return of 6.2% over an average term of 3.4 years – an increase of 2.68% from 2020. Once again, the selection of Lowes ‘Preferred’ plans has proven a success, with 82 publicly available ‘Preferred’ plans maturing in total, outperforming the subsector averages in almost all instances. Lowes ‘Preferred’ maturities generated a sector busting average annualised return of 6.99% over an average term of four years; the upper quartile

of these maturities realised an average annualised return of 10.77% where the lower quartile returned 3.26%. The latter half of 2021 witnessed a sharp increase in the issuance of autocall plans with shorter maximum investment terms, particularly those with five-year terms. Throughout the previous decade we have seen the maximum possible term of autocall products increase to as many as ten years, which we view to have been for the benefit of the investors, for reasons elaborated on later in this review. It is our view that this re-introduction of five- year maximum duration autocalls is an unwelcome shift, at odds with the best interests of the sector and investors and we will continue to comment on it undesirably. That being said, this review is a largely positive piece, and we hope investors and providers alike concur in its reflection of a generally improving sector.

Ian Lowes, Managing Director


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