UK: Structured products slip in survey ranks

by Nick Rice
FT Investment Adviser Magazine
January 12, 2009

Compared with earlier poll data, fewer advisers now recommend structured products

A Morgan Stanley survey of advisers has indicated just more than half are recommending structured products to their clients, down from more than 90 per cent in a Keydata poll in early August.

However, the Keydata Investment Services research covered only Keydata's current client lists, while the Morgan Stanley survey, which was conducted in December, covered other advisers as well as existing buyers of Morgan Stanley products.

According to the Morgan Stanley poll, 55 per cent of Morgan Stanley's clients were recommending structured products. Sixty-four per cent said they were recommending up to 20 structured products a year.

This compared with the 71 per cent of advisers favouring bonds, 57 per cent mutual funds, 56 per cent cash alternatives and 21 per cent direct equity investment.

More than 90 per cent of advisers in the Keydata poll were maintaining or increasing allocations to cash, 76.1 per cent to fixed income, 42.9 per cent to corporate bonds, 19.1 per cent to UK equities and 16.7 per cent to international equities.

However, 40 per cent of the respondents to the Morgan Stanley poll said they would be more likely to recommend structured products if markets remained volatile. Thirty-eight per cent said volatility would not affect their recommendations.

The Morgan Stanley poll also revealed slightly more advisers were considering emerging market growth products over US equity market recovery products, at 42 per cent compared with 41 per cent, although many UK fund managers have said they favour the US over emerging markets at present.

UK equity market recovery was the most popular category at 58 per cent.

Of the characteristics of a structured product, advisers considered capital protection the most important at 32.2 per cent. Credit rating came in second at 30 per cent, with participation third at 26.2 per cent. Consistency, administration, brand and sales support each received less than 6 per cent of votes.

However, not all providers agreed with this assessment. Laurent Ramsay, chief executive of Pictet Funds, said it was likely money would move out of structured products throughout Europe, partly as their workings were too opaque for investor tastes at present.