UK: Wealth advisers and private banks turn to structured products

Wealth advisers are increasingly turning to structured products in an effort to protect clients from stormy markets while offering the potential for capital growth, according to the chief executive of Blue Sky Asset Management, a UK-based structured products specialist set up last year.

Blue Sky is launching a third issue of its Asset Allocation Accelerated Growth Plan, which enables investors to construct their own portfolio split between UK, US, European and Japanese equity markets, while receiving capital protection and leveraged returns.

Chris Taylor, chief executive, said: "We are laying down the gauntlet to the traditional mutual fund and index tracker world. We think the features of the plan question the rationale for investing in those products."

He pointed out that traditional mutual funds had haemorraged assets in the first quarter in the both the UK and US, while demand for cautiously managed and structured products had been robust. "Investors are voting with their feet, and walking out of traditional mutual funds into structured investments that can alter the risk and return profile of their portfolio."
While the firm is focussing its efforts on high-end intermediaries, which are increasingly targeting high net worth investors, it is also seeing interest from private banks.

Taylor said it recently structured a sophisticated product based on a distressed debt hedge fund which was being sold by a Swiss private bank. "We are seeing interest from the more open-minded private banks which are prepared to talk to an independent provider," he added.

Blue Sky is increasingly building inflation protection into its structures. "While a lot of people are talking about how to structure portfolios to hedge against rising inflation, we think there is no better protection that a direct link to the retail price index. It doesn't get much cleaner than that," said Taylor.

For the original article in Wealth Bulletin, click here.