DWS Scudder Doubles S-Notes Sales to $600 Million (Investment News)

Excerpt: DWS Scudder has launched 155 structured notes since 2006, including 59 through June 30 of this year, with another 61 expected by the end of the year. It expects to sell $600 million in structured notes this year, compared with $300 million last year.

By Aaron Siegel
Investment News

In a bid to increase its market share among retail investors in the United States, DWS Investments has pursued a branding strategy and broadened its product line.

Its parent company, Deutsche Asset Management Inc. of New York, changed the name of its U.S. retail unit to DWS Investments, from DWS Scudder. The name switch means that the company will operate under a single brand.

"It makes sense for DWS to have a global brand ... so the brand positioning is consistent with the rest of the world," said Howard Schneider, a former Scudder employee and president of Boxford, Mass.-based Practical Perspectives LLC. "Having multiple brands just causes confusion as to who you are, unless you are creating a certain brand for a certain way of managing money."

The company has been pushing to penetrate the U.S. adviser market long before the re-branding. It has expanded its sales organization to 200 wholesalers, from 172 in 2005, and plans to expand its head count next year.

Additionally, the firm plans "to play a bigger role in the U.S. market" and has expanded the company's product mix beyond mutual funds, said Axel Schwarzer, chief executive of DWS Investments.

The asset management firm wants to become a multiwrapper absolute-return manager that integrates retail, alternative investments, insurance and institutional businesses, the company said.

To attract advisers, New York-based DWS Investments has unveiled a slogan and a website to highlight its commitment to advisers.

Using the "Reshaping Investing" slogan, the company is emphasizing how it will help investors cope with lower-return expectations and higher volatility through investments in alternative investments, structured notes, absolute returns and structured products, according DWS Investments.

DWS has launched 155 structured notes since 2006, including 59 through June 30 of this year, with another 61 expected by the end of the year. It expects to sell $600 million in structured notes this year, compared with $300 million last year.

Additionally, DWS Investments launched the DWS RREEF Global Infrastructure Fund this year, after bringing to market in 2007 the DWS Disciplined Market Neutral Fund, DWS Alternative Asset Allocation Fund, DWS LifeCompass Protect Fund and DWS Life Compass Income Fund.

DWS Investments manages $817 billion in assets worldwide, including $345.9 billion of retail assets under management as of March 31.

Fully 71% of those assets are from European investors, while 24% are from the Americas, and 5% are from the Asia-Pacific region.

The figure also includes $80 billion in retail and retirement assets in the United States.

The company also wants to move up its asset rank to the top 10, from 24th, in the United States, and to the top five globally, from ninth.

However, Mr. Schneider questions whether DWS' strategy to focus on just niches will help propel it into the top 10 among asset managers. DWS Investments is "doing lots of innovative things, and the challenge is to get critical mass" in products such as alternatives and structured notes, he said.

A danger in creating these kinds of products "is that you can be successful but not raise enough assets to raise the core of your business," Mr. Schneider said. "If their goal is to become a top 10 asset manager, they have to hit the right niche, then they have to have the right product to bring to market."

Meanwhile, one analyst is taking a wait-and-see approach.

"DWS has made some positive changes to focus on their strengths, and we need to see them stabilize and deliver good results for shareholders," said Miriam Sjoblom, a mutual fund analyst for Morningstar Inc. of Chicago. "Just putting the changes in place is not good enough, and we need to see them actually work."

E-mail Aaron Siegel at asiegel@investmentnews.com.

SPA Comments to SEC on Proposed ABS' Credit Rating Rules

July 25, 2008

Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549-1090
Attn: Nancy M. Morris, Secretary
Re: Proposed Rules for Nationally Recognized Statistical Rating Organizations Release No. 34 57967 (File No. S7 13 08)

Ladies and Gentlemen:

This letter is submitted on behalf of the Structured Products Association in response to the request of the Securities and Exchange Commission (the “Commission” or the “SEC”) for comments on Release No. 34-57967 (the “Release”). The Release sets forth proposed rules that aim to increase transparency and avoid conflicts of interest in the credit rating process. We note that at or about the same time that the Commission published the Release, the Commission also published several other proposed revisions to the Commission’s rules and regulations that refer to and rely upon credit ratings. We are not commenting on those additional rule proposals.

The comments presented in this letter represent the views of the Structured Products Association (the "SPA" or the "Association"). The Structured Products Association is a New York-based trade group. The Association’s mission includes positioning structured products as a distinct asset class; promoting financial innovation among member firms; developing model “best practices” for members and their firms; and identifying legal, tax, compliance and regulatory challenges to the structured products industry. The Association was the first trade organization for structured products in the United States and now has more than 2,000 members, including members from securities exchanges, self-regulatory organizations, law firms, compliance professionals, investor networks, family offices, and buy-side and sell-side structured products firms. The Association counts among its members some of the largest and most active investment banks and distributors in the U.S. structured products market.

The Association is committed to promoting the development and growth of the structured products market in the United States, and to ensuring that investors in structured products understand the terms and risks of their investments. To our dismay, there has been a great deal of confusion in the popular business press regarding the nature of “structured products.” For example, in articles and commentaries on the current credit crisis, “structured products” have been frequently confused with products issued by securitization vehicles, including mortgage-backed and asset-backed securities, such as CDOs and CLOs.

Please note that, unlike the securities at the heart of the current credit crisis, the holders of these structured securities are subject only to the creditworthiness of the issuer of these securities. The issuer of structured products does not typically pass along (and therefore depend upon) the payments from the underlying assets, as would occur in the case of a securitization transaction.

The entire comment letter can be accessed from the SPA website by clicking here.

India: Equity SPs - Best of both worlds (Business Times)

By: Akhilesh Singh

Over the years, investment managers have worked hard to develop products that suit various investor profiles. Asset managers in western countries have been offering products across asset classes such as equities, debt, foreign exchange, commodities , and so on, for a long time now. However, in India, the pace has been comparatively slow in innovating and offering such products, partly due to regulatory issues and partly due to the lack of investor awareness and acceptance.

In the last three years, there has been a significant effort by the investment managers to offer equity-linked derivatives structures in India, and many of the most sophisticated equity derivatives structured products have been introduced recently. They have developed significantly, largely due to constantly changing market dynamics, and therefore the changing investor appetite, which has encouraged the investment managers to innovate and modify constantly.

What they are

They are an effective and efficient way to invest in hybrid structures that allow one to invest in debt while also participating in equity markets, without risking one’s capital, and, in certain cases, even guaranteeing at least a minimum return.

Most structures in India offer 100% capital protection. However, if you’d like a more aggressive structure, capital protection may be a little less than 100%, depending on product design. As such, they are mainly used within the secure part of a portfolio to increase returns with limited risk on capital. Equity derivative structured products can also be customised to meet an investor’s risk or return profile.

Advantages

For one thing, they provide an opportunity to participate in equity markets coupled with capital protection or even return protection. This kind of product is best suited for investors who are very conservative , but who also want to enhance returns without taking any additional risk.

Secondly, equity derivative structured products enable risk-controlled access to volatile asset classes and alternative investments. In the current market scenario, these kinds of products offer a fantastic risk-minimised investment option in alternate asset classes.

Thirdly, they are an efficient diversification tool. They help diversify the portfolio management style, and hence provide a hedge in the portfolio in case of a difficult market situation.

Fourthly, they offer an efficient way for an investor to take advantage of a given market scenario. Fund managers have been constantly churning various structures that suit the prevailing market and economic situations, which helps the investor to adjust to the changed scenario and accordingly make her or his investment decisions.

And fifthly, equity derivative structured products let us minimise the frequency of interventions , which are too often guided by sentiment. These products are closed-ended and mostly follow a predefined investment strategy that is executed in the beginning. One cannot make any changes later in the structure. However, this can, in some situations, be detrimental to performance.



Types of products

There are several types of equity derivative structured products. Investors can choose from the palette depending on their risk profile.

High fixed return products:

These compare with debt products, and offer a high yield on the portfolio and keep a measured equity participation, to ensure low-to-moderate risk. Investing in such products also helps the investor get a higher post-tax yield, as these debentures attract long-term capital gains tax for such structures that mature over a 365-day period , where the tax rate is lower than on fixed deposits.

Market neutral products:

These are designed for investors who don’t have directional market views, and especially suited for highly volatile and uncertain market environments. These products are designed to yield betterthan-market returns if the markets rise, but—pleasantly enough—give similar returns even when the markets move downwards. Investors who have been historically investing in bank fixed deposits because of a strong aversion to risk should consider such product structures.

High equity participation:

These products offer a high level of equity participation. However, they still hedge or limit the downside risk on the capital. These structures are ideal for investors who are aggressive and want significant participation in a rising market , and are willing to sacrifice their fixed-income returns for that opportunity. However, these structures mostly do not allow positive participation if the markets are bearish. In my assessment, these products offer investors the best of both worlds, with riskadjusted returns. When the markets are volatile and directionless , they hedge or at least limit the downside risk, and eliminate the need to monitor one’s portfolio daily. They also eliminate the risk of impulsive decisions.

Akhilesh Singh is Business Head, Emkay Midas Wealth Management

Lawyer: The Hapless Members of Citi’s ELKS Club (Seeking Alpha)

by Jake Zamansky, Esq.

It’s only a hunch, but experience tells me you can soon expect to be reading a lot about “ELKS” and other structured investments in the business press.

The name evokes images of a hardy, austere and stable animal able to withstand the harsh elements of the forest. But not in this story. For some Citigroup customers, ELKS might conjure images of a broker who duped you into buying risky securities that were inappropriate with your investment goals.

Citi’s ELKS (equity linked security) product is a risky derivative instrument where an investor is offered a specified return on a structured security tied to an individual stock. Providing the stock maintains a minimum value, the guaranteed return is paid. If the stock ever falls below the minimum value (sometimes around 80 percent), the ELKS immediately convert into shares of that stock. Then if the price of the underlying stock declines, the investor could receive a stock worth much less than the initial investment.

Here’s the catch: ELKS offer potentially higher returns, but the downside risk is unlimited if the stock goes south. If the underlying stock happens to dramatically increase in value, the investor only gets the guaranteed return.

For Citigroup, it’s a classic case of “heads I win, tales you lose.” The bank charges investors an upfront commission to buy ELKS and likely earns additional profits through hedging. Not surprisingly, brokerage firms were aggressively peddling structured derivative products like ELKS to unsophisticated retail investors a few years back, prompting FINRA to warn member firms of concerns that customers didn’t understand the inherent risks.

There’s evidence that FINRA’s warnings weren’t heeded. I represent a retired couple over 80 whose Citi broker last year bought $300,000 worth of ELKS on their behalf. The ELKS were highly unsuitable for retirees simply looking to preserve capital. The highly volatile stocks my client’s ELKS were derived from included Yahoo!, Cemex and Sandisk. The couple has lost nearly a third of their principal as the underlying stock’s value plummeted.

Admittedly, I have only encountered one ELKS case so far, but many brokerages firms peddled similar products using monikers such as PACERS, STRIDES, SPARQS, and ELEMENTS. Some commentators were critical of me when I sounded the early alarm about auction rate securities, but that warning proved quite prescient. Recall, that the SEC uncovered wrongdoing in the ARS market in 2006, but the activity persisted. Sadly, I can’t help but suspect that the experience of my elderly clients with ELKS is not an isolated incident.

Stay tuned.

This article is found on the SeekingAlpha.com website. For the original post, click here.

Reg. Rep: Structured Products - Bright Future for Securitization?

By Christina Mucciolo
July 16, 2008

Securitization has gotten a bad reputation lately. But the securitization process—taking debt and pooling it into a derivative whose value is based on the underlying assets—was meant to reduce risk. Take collateralized-debt obligations (CDOs); they are a kind of derivative, a structured product, if you will, that put the lie to that concept. Indeed, given the current dismal state of the CDO market, you’d think that they might taint the entire derivative, structured product marketplace.

Of course, derivatives and structured products refer to a broad category of investments.

Basically, the definition of structured product includes any hybrid financial instrument—typically a registered note, bank deposit or private placement—linked to the performance of a derivative, i.e. an underlying asset, such as a stock, an index, a commodity, currency or other investment. If you don’t know about the vehicles, you may want to learn.

Advisors who use them say they allow an investor to enjoy upside potential on an asset while protecting the on the downside should the underlying asset value drop. Already popular in Europe, structured products have gained popularity at wirehouses and investment banks.

In fact, the retail market bought almost half (worth about $58 billion) of the structured products issued in the U.S. in 2007, according to the Structured Products Association (SPA). About $114 billion in structured products were issued in the U.S. in 2007, a jump of 78 percent over 2006. As of year-end 2007, the American Stock Exchange was trading 400 structured products, with 128 new listings.

While many advisors find them too complex and expensive (loads can reach 6 percent), structured products are being mastered and used by some advisors, such as Scott Miller Jr., managing partner at Blue Bell Private Wealth Management, a fee-only RIA in Blue Bell, Pa. Of the $300 million in assets managed by the firm, Miller estimates 30 percent of it is invested in structured products. Miller says structured products are good for clients who want exposure to equities, but who are willing to give up some upside return potential for some downside protection—they’re buy-and-hold investments. “It is just the nature of anything derivative-based; they may get too complicated for some people,” Miller says.

That’s why advisors specialize in the ones they understand best. Bradley Pace, president of Pace Capital Management, says they are suitable for HNW clients, and he only invests about 10 percent to 15 of any one clients’ portfolio in such products. Pace says he stays away from the risky structured investment vehicles (SIVs), such as reverse convertibles; he sticks to the equity-linked CDs that are more basic. “These are great for clients who are very nervous about the market, but don’t want to lock up all their money in a Treasury note, make 2 percent and lose against inflation for the next two or three years,” says Pace.

Too Good To Be True? The complicated nature of structured products has raised some concern that some advisors and banks understand these products as little as they understood CDOs and other credit swaps that caused the current financial meltdown. “Everyone is wondering about the future of securitization, and I think there is a great deal of concern about credit derivatives generally,” says Anna Pinedo, a securities and derivatives lawyer with Morrison & Foerster and co-chair of the SPA’s Best Practices Committee. “Even though I think structured products are relatively straightforward, there is the possibility that there could be a little bit of a market overreaction against anything that is perceived as being at all structured or complicated, and so that is something that everybody needs to watch out for.”

Still, industry professionals haven’t seen advisors or investors backing away from structured products. In fact, the credit crisis has highlighted the importance of credit quality, says Chris Warren, managing director and head of structured products Americas at DWS Investments, the U.S. retail division of Deutsche Asset Management.

For the full article from Registered Rep., click here.

WSJ: New ETNs Fail To Grab Investor Interest

By IAN SALISBURY
July 17, 2008

This might have been the year of the exchange-traded note, with fund firms and investment banks launching more than 60 new ETNs.

As it turns out, investors have so far turned up their noses at most of these complicated ETF-like securities. While the bulk of new products focus on red-hot assets like oil and other commodities, drawbacks such as credit risk, complicated strategies and uncertainty about the securities' tax status have kept many investors on the sidelines.

"I've talked with a lot of [financial advisors] and they've been staying away," says Ronald DeLegge, a former financial advisor who now offers ETF investing advice to online subscribers. "You've got a lot of risks with these things."

Exchange-traded notes have collected about $7.2 billion in assets since the first ones were launched in 2006, according to fund researcher Morningstar Inc. But the bulk of that, about $6 billion, is in 30 ETNs by Barclays PLC, which invented the product.

Another 59 ETNs created by eight other providers, mostly this year, hold just $1.29 billion, collectively, or about $22 million on average.

In all, 78 of the 89 ETNs on the market have less than $100 million. Barclays couldn't be reached for comment.

Investors, of course, could warm to new ETNs over time. It sometimes takes new funds several years to build a following. Still, ETNs' struggles seem to mirror those of their close cousins exchange-traded funds, where fund companies launched hundreds of products hoping to replicate success of a few early blockbusters and garnered only mixed results.

For the full article from the Wall Street Journal, click here.

Final: SP Principles Released For Individual Investors

Five leading trade associations, co-sponsors of the Joint Associations Committee (JAC), today released “Structured Products: Principles for Managing the Distributor-Individual Investor Relationship.” The global, non-binding Principles address a wide range of issues affecting distribution of retail structured products to individual investors.

The Principles complement the JAC’s “Principles for Managing the Provider-Distributor Relationship,” which were released in July 2007. The Associations issued the Principles for public comment on May 12 and are today publishing them in final form.

"The second set of JAC Principles represents many months of thorough memberdiscussion and wider syndication, and articulates the values that market participants share as they promote the continued development of a healthy market in retail structured products,” said JAC’s Chairman, Timothy Hailes, Managing Director and Associate General Counsel at JP Morgan Chase in London.

“As with the July 2007 Provider-Distributor Principles, the key will be intelligent and proportionate application to local regimes."

The JAC comprises the following trade associations: European Securitisation Forum (ESF), International Capital Market Association (ICMA), London Investment Banking Association (LIBA), the International Swaps and Derivatives Association (ISDA®) and Securities Industry and Financial Markets Association (SIFMA).

The principles were based on extensive work and collaboration with the associations’ member firms, and on consultation with distributor associations.

The Principles can be accessed by clicking here.

Bloomberg: Bridgewater predicts $1.6 trillion in subprime losses

Bridgewater Associates has warned of a massive $1,600bn (€1,020bn) of banking losses from the global credit crunch, four times official projections, according to a report in Swiss newspaper SonntagsZeitung.

The US hedge fund said true losses would swell if banks were forced to adopt "mark-to-market" methods of valuing structured credit instead of the "mark-to-model" currently being used.

“We are facing an avalanche of bad assets. We have big doubts as to whether financial institutions will be able to obtain enough new capital to cover their losses. The credit crisis is going to get worse," Bridgewater was quoted as saying the report.

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.

Financial Times: Downside protection gains popularity

By Steve Johnson
Published: July 7 2008 03:00

One of the key selling points of structured products is that, in many cases, they offer risk-averse investors the chance to shield themselves from falling markets.

The capital guarantees embedded in structured products can be absolute, promising the investor all their money back irrespective of the losses suffered by the underlying assets. However, to stand a stronger chance of delivering meaningful returns, more often than not the downside protection is limited - if asset markets suffer particularly sharp falls, the end investor will suffer as well.

For example, equity-linked products may offer capital protection providing an underlying equity market does not fall by more than 50 per cent during the fixed term life of the product.

If this "soft floor" protection barrier is breached, and the market fails to recover during the product term, the investor may end up shouldering losses on a one-for-one basis, just as they would had they entered the market in a traditional, naked, manner.

Some products, such as many of the precipice bonds sold en masse to UK retail investors in the early years of the millennium, had an even nastier trick in the smallprint.

When these soft barriers were breached, as they were in many cases, investors often lost money on a leveraged two-for-one basis - losing up to 80 per cent of their investment in some cases.

The industry has cleaned up its act since then, and few reputable issuers would market such leveraged downside products to retail investors, certainly not without adequate risk warnings.

But despite this episode, the provision of downside protection is a crucial selling point for the structured products industry, particularly when investors are cautious, as they are at present.

For the full article from Financial Times, click here.

Financial Times: Fledgling SPs flying into a harsher climate

By Hannah Glover
July 7 2008 03:00

Structured products have established a foothold in the US retail markets, but some analysts say even leading issuers such as DWS parent Deutsche Bank, UBS, Barclays and Citigroup may struggle to maintain momentum.

Indeed, the fledgling industry has gained traction in recent years, growing from $64bn (£32bn, €40bn) to $114bn between 2006 and 2007, according to estimates from the Structured Products Association. But tax issues, distribution challenges and investor mindset will make it difficult for banks offering the products to keep that growth going.

Current markets and investor perception of the products pose one challenge. "With all the negative perception of derivatives, they really have fallen out of favour in the US," says Darlene DeRemer, who leads the advisory practice at Boston-based Grail Partners, a merchant bank specialising in the investment management industry.

"Clients don't really understand the products; therefore, financial advisers might not want to sell them," she says.

Adviser advocacy is critical to the sale of structured products in the US, where distribution is dominated by financial advisers and retail brokerage houses. By contrast, in Germany and France, retail investors can buy structured notes from local banks, post offices, or even using their mobile phones.

The US system required the first firms to try to break into the American market - mainly banks with European parents - to pay for shelf-space, sometimes even paying a third-party broker to access their broker-dealer clients. The result was higher costs and compressed profit margins.

Christopher Warren, managing director and head of structured products at DWS Scudder in New York, says: "We weren't talking to the end client, and we didn't know what they wanted."

For the full article in Financial Times, click here.

Financial Times: High SP inflows show US playing catch-up

By Paul O'Dowd
Published: July 7 2008

Structured products, long popular in Europe, are now taking hold in the US as markets spook investors and baby boomers look to protect their wealth. Last year, assets in structured products climbed to $114bn (£57bn, €72bn) in the US, up from $64bn in 2006, according to the Structured Products Association.

Last year, Merrill Lynch was the top issuer with $6.1bn in sales followed by Citigroup with $3.1bn, Morgan Stanley with $3bn, Barclays with $2.6bn and UBS with $2.3bn. These numbers represent the above firms selling only their notes and not competing firms' notes.

Some examples of structured products are: principal-protected notes, index-linked notes, performance-leveraged upside securities and reversed-convertible notes.

This year's inflows are so far keeping pace with last year, says Philippe El-Asmar, head of solution sales for the Americas at Barclays.

Structured products, formerly investments mainly for the wealthy, have since come down-market and are now available in the retail space.

Generally these products are created by combining or snapping-on additional financial products to a traditional security, such as a bond.

These snap-on products can be selected to have low correlation to the underlying investment, which gives the advantage of increasing diversification of the final structured product. If one component of the structure deteriorates, other components will serve to offset or dilute this loss, providing a safety net to investors.

The primary driver behind the high inflows into structured products seems to be that brokers and registered investment advisers (RIAs) are embracing the investment for the first time.

For the full article in Financial Times, click here.

Derivatives Week: Global Principles for SPs Go Final Next Week

by Sam Mamudi

The final version of a new set of principles for the structured product industry is due to be released early next week.

The Principles for Managing the Distributor-Individual Investor Relationship follows last year’s retail structured products provider-distributor principles. While those principles were focused on the relationships between firms, the latest principles address interactions with clients.

As with the previous principles, the new ones will be jointly released by five trade associations, the European Securitisation Forum, International Capital Market Association, International Swaps and Derivatives Association, London Investment Banking Association and Securities Industry and Financial Markets Association.

Timothy Hailes, managing director and associate general counsel at JPMorgan and Chairman of the Joint Associations Committee on Retail Structured Products who produced the principles, said in producing the latest set he had spoken with various regulators, including the U.S. Securities and Exchange Commission and Hong Kong’s Securities and Futures Commission.

He said the they should be read as a list of desirable outcomes, rather than a document that prescribes how things should be done.

The principles call for measures such as adequate risk disclosure to clients and training for financial advisors. “Although these principles are non-binding…and do not create enforceable obligations or duties, firms…are encouraged to reflect these principles in their policies and procedures,” states the document.

Anna Pinedo, partner at Morrison & Foerster in New York, said the document will not give firms in the U.S. reason to pause or reassess compliance procedures. “These are a nice reminder, nothing more than that,” she said.

However, the principles are “ahead of the curve in a number of [other] jurisdictions,” said Hailes.

Australia: Choosing products that are structurally sound

by David Jones-Prichard

LAST year Australians invested some $4 billion, with new products and providers continuing to emerge.

No longer confined to a simple choice between stocks, bonds and mutual funds, today's retail investors are using structured products to access a greater variety of asset classes previously the preserve of professionals.

Now, in one straightforward transaction, retail investors can use structured products to buy or leverage into international stocks, emerging markets, currencies, hedge funds, exchange traded funds and others.

The broad and growing appeal of structured products can be attributed to the careful balance between the exotic and the familiar. High gearing potential and capital protection offer the additional benefits of a tax-efficient strategy with built-in buffers.

Given this variety and "balance", it is not surprising that investors vary in their own individual circumstances and financial goals. However, to illustrate, two typical investor profiles are the High-Roller and the Saver.

For the full article in The Australian, click here.

Business Week: Absolute Return Notes Rule As Bear Mkt Scares Off Optimists

By Matthew Goldstein, Ben Steverman and Ben Levisohn

The first six months of 2008 ended with U.S. stock markets in the dumps. Now, with the major indexes in or near bear market territory after touching highs in October, hopes for a happier second half are fading fast.

A toxic brew of sluggish economic growth, rising unemployment, and spiking inflation-otherwise known as stagflation-is prompting market watchers to backpedal furiously on earlier predictions of a rally later this year. Noticeably absent from the discussion are the traditional stock market drivers of strong earnings and interest-rate cuts, neither of which seem to be on the horizon.

Economists, meanwhile, are beginning to tamp down expectations for global growth not only for the rest of this year but for 2009 as well-especially with oil surging to new heights.

All of which is leaving traders tossing around adjectives like "tired," "nervous," and "depressed" to describe the mood heading into the slow July-August months. "The market is in for a rough summer," says Gary Wolfer, chief economist with Univest's Wealth Management & Trust Group, who has been dialing down his once-optimistic outlook for corporate profits. Some pros are even seeking refuge in newfangled instruments known as absolute return barrier notes, designed to protect principal first and allow for capital gains second. In this environment, one can't be too safe.

If history is any guide, investors might need to hunker down for a while. James Swanson, chief investment strategist for mutual fund firm MFS Investment Management, notes that the average bear market lasts 406 days, during which stocks fall 31%, on average. Using that benchmark, we're only halfway through the pain.

Unhappy Anniversary
Much of the malaise, of course, stems from the credit crunch, which will soon mark its one-year anniversary. Banks are expected to notch an additional $600 billion in losses in coming quarters from the mortgage mess and the resulting economic troubles, bringing the total to $1 trillion. They're still ducking for cover: In a recent Federal Reserve survey, 70% of banks had tightened their lending standards for home equity loans.

Whether it's technically a recession or not, it certainly feels like one for many individuals and businesses. Credit-card delinquencies are on the rise, meaning banks will have to set aside money to cover a new round of losses from troubled loans. American Express (AXP), for example, issued a sobering statement on June 25, noting that the business environment in the U.S. continues to weaken as "credit indicators deteriorate beyond our expectations."

That's bad news for the broader stock market. Usually, financials and consumer discretionary stocks lead the way in a recovery, but both sectors are heading south now.

The Philadelphia KBW Bank Index, which tracks banking stocks, was down 34% in the first half of 2008, compared with 12.8% for the Standard & Poor's 500-stock index. And consumer-related companies from Starbucks to Kohl's are reeling.

In fact, few sectors are showing signs of life. Technology-industry analysts are fretting about a slowdown in corporate spending, while health-care stocks are being pummeled on fears of policy changes in Washington after the 2008 election.

On July 2, for example, medical insurer UnitedHealth Group cut its profit outlook for the year. The lone bright spot: energy, especially coal stocks and oil drillers.

With so much uncertainty swirling, some money managers are pushing instruments designed to limit investors' exposure to volatility.

Absolute return barrier notes tie up a wealthy client's money for 18 months. If a specific benchmark, such as the Dow Jones industrial average, stays within a certain range over that period the notes pay a hefty interest rate.

Should the index deviate from the target range, the investor in these sophisticated products doesn't collect the yield, but the principal remains intact. "It's an opportunity to get an above-market return with protection," says Keith Styrcula, chairman of the Structured Products Assn. "You either get everything or nothing but your principal." Given the way the market has been performing, just treading water may be enough for many investors.

For the full Business Week article, click here.