Structured products – one of the most misunderstood and contentious investment product sectors – is celebrating a new UK milestone.
Last month – February 2021 – saw the maturity of the 1,000th FTSE 100 linked capital at risk autocall in the UK retail market.
The Investec FTSE 100 Defensive Kick-Out Plan 47 matured on its third anniversary on February 12 returning original capital plus a gain of 20.55%. The FTSE 100 index to which the plan was linked, was down by 8.89% over the three years.
To mark the milestone, StructuredProductReview.com, a dedicated research service conceived, created, developed and maintained to help professional advisers engage with the structured products sector, has produced a Structured Product Autocall Review. The document provides an independent review of the evolution of the sector and its performance.
Structured products first appeared in the 1990s, but it was not until 2003 that the first autocall version, or kick-our contract, appeared. The popularity of autocalls grew to the point that they are now the most common vehicle among structured products.
Newcastle-based Ian Lowes, MD of StructuredProductReview.com, said: “The fact it has taken from 2003 until now to reach the 1,000th maturing autocall is a significant milestone for the sector. To reach a thousand of anything – particularly capital at risk investments – is a major landmark for any financial product.
“More generally, the structured products sector continues to evolve and develop. The sector is well regulated, has become a lot less complex, and many plans regularly outperform other investment products, while providing contingent capital protection against market falls. They can no longer be dismissed by any independent investment adviser.”
These fixed-term products are market-linked and can be highly tailored, with some more risky than others. Autocalls have become popular because they limit investment exposure, building in a buffer of protection against falling markets, thereby increasing the probability of the defined return being achieved.
Analysis of autocall maturities from 2003 shows that only eight of the 1000 maturities returned no gain, returning capital only. The mean annualised return was an inflation-busting 8.04% with the highest annualised gain at 16.2%.
Ian Lowes added: “This is an impressive performance by anyone’s standards. Structured product autocalls are a proven product for investors. They should be considered as part of any balanced portfolio.”
The StructuredProductReview.com Structured Product Autocall Review can be found at https://www.structuredproductreview.com/education/structured-product-autocall-review-2021/