“I think there is a very different use of structured products now [since 2008]; some investors are still wary, but I do believe that they offer opportunities for investors wishing to express a specific view,” says Daniel Ellis, head of investments at RBC Wealth Management.
“We recently took a view on oil, that we are fairly close to the bottom and we will see it trending upwards again towards the end of the year.
“We are able to express a view called a ‘twin-win’ which pays off whether you think oil going to go up or go down. Equally, there is another product for the view that we are at the bottom and it still has some downside protection in.”
Another wealth manager who has recently used a structured product, this time for equities, is Apollo Multi Asset Management, which has seen the volatility as a buying opportunity for a bespoke autocall structured product in its Adventurous fund.
The fund will receive 24% should equity indices in Europe, the US, Japan and Hong Kong be all higher in one year’s time. If equities fail to deliver the growth, the call will double into year two at 48%, while it also offers downside protection.
“These investments generally only work in times of stress because the option pricing becomes attractive when there is lots of volatility,” says fund manager Ryan Hughes.
“When you can get some capital protection on the downside in a market such as this and have the potential for enhanced upside in a market such as this then that’s the right time to be using structured products.”
