Investec is scrapping structured products in the UK as it shifts its focus to discretionary fund management and managed portfolio services.
The company will not launch any further retail structured products after the launch of its final plans between 15 February 2021 and 1 April 2021.
“This is a significant move from Investec as they previously dominated structured products in the UK,” said Willis Owen head of personal investing Adrian Lowcock.
Since 2009, 1,191 Investec structured products have matured paying an average return of 7.44% per annum and of these, 1,171 paid a positive return, 20 returned initial capital and none resulted in a capital loss, according to Zak de Mariveles, chairman of the UK Structured Product Association.
Investec said the decision was made for commercial reasons as structured products are no longer the most efficient way to raise retail funding.
The bank’s operating profit slid 48.4% to £142.5m in the half year to September 2020, as risk management and risk reduction costs related to hedging its structured products book resulted in trading income declining by 100.6%. Investec said in its interim statement that it would “take active steps to de-risk the profile of this book”.
However, Investec said that “other factors in the structured products environment, such as persistently low interest rates and increased regulatory costs, have also contributed to this decision”.
“To make these products work costs are a significant factor but also with central banks and governments providing monetary support and fiscal stimulus, I suspect there is less appetite for structured products in the retail market,” said Lowcock.
