The UK Structured Products Association (UKSPA) has launched a free tool that allows financial advisers and wealth managers to see how structured products affect the risk and performance of an investment portfolio.
The association’s Portfolio Optimiser uses underlying data from independent structured products research and analytics consultancy Future Value Consultants (FVC) to assess how structured products fit into an existing portfolio.
Users can create their own structured product or select a vehicle currently listed on FVC’s Structured Edge Research Service. They can then see how this affects risk and return in either a custom portfolio taken from a list of mutual funds and ETFs or in a number of pre-built model portfolios.
The tool will then generate a report of both historical stats and future predictions, comparing the original portfolio to the “modified” version.
Greater reach
Clive Moore, managing director of investment service IDAD, told Portfolio Adviser sister title International Adviser: “Structured products are widely used by professional investors in the UK, including discretionary portfolio managers, so it’s great to see the UKSPA promoting tools that encourage advisers to incorporate them more widely in clients’ investment portfolios.
“Returns available on corporate bond funds, which have traditionally been used to deliver lower-risk returns, are at all-time lows – sometimes below the costs of investing.
“Many of the alternatives available, like property and secured-lending funds, can suffer from illiquidity and valuation risks, which structured products and market-linked deposits don’t.”
Lowes Financial Management managing director Ian Lowes told Portfolio Adviser the fact the tool can be used to compare any currently available structure against any individual fund or portfolio should help shape investors’ thinking towards these products.
“The results are very compelling, so much so, in many instances that we have tested, the logical outcome is to commit more to the structured product element of the portfolio,” he said.
He added: “While we would not condone over-exposing to a single product, or counterparty, the tool will help convince technical analysts of the viability of including a portfolio of structures alongside funds and will help establish which structures will benefit which portfolios.”
Outperforming
UKPSA chairman Zak de Mariveles (pictured) said: “Investing without structured products is like playing a team with one man down – it’s harder to compete if key players are missing.
“We have designed Portfolio Optimiser as an easy-to-use and effective way to see how structured products can be taken off the bench to help optimise a portfolio line up.
“We hope it provides reassurance for those considering using structured products as a way to diversify and enhance investment portfolios.
“Over the last 10 years, structured products have been outperforming many funds, and we are excited to provide for the first time a tool to the adviser and wealth management market that will help them better understand how to optimise their allocation across a clients’ overall portfolio.”
