The UK retail structured product sector saw a record number of plans issued in 2023, as well as being one of the best in term of performance, according to the new annual study by StructuredProductReview.com.
More than 96% of plans that matured last year – some 608 out of a total of 629 – gave positive returns for investors, with only 6 returning a loss, less than 1% of the total plans.
The data showed 629 maturities gave an average annualised return of 6.51% over a term of 3.14 years, with upper and lower quartiles of 9.91% and 2.84% respectively.
Ian Lowes, managing director at Lowes Financial Management and founder of StructuredProductReview.com, said: “Investors in retail structured products enjoyed another positive year with the overwhelming majority rewarded with strong returns, all exactly in line with the contracted, defined outcomes specified at outset. In comparison to the last five years, the headline numbers for 2023 show it to have been the best performing year for the sector in most areas.”
Lowes said FTSE-linked, capital-at-risk autocalls continue to be the most common shape. Typically, these are designed to mature on the first relevant anniversary that the FTSE 100 Index is above a specified reference level. Over the last five years these have delivered an average return at maturity of 7.18% per annum, over an average duration of 2.45 years.
Lowes commented: “With the upper quartile of this subsector consistently delivering over 9% per annum and the lower quartile still topping 5% per annum, the returns have been at levels many passive FTSE investors, let alone active managers, would have been grateful for over recent years.”
Lowes said the latest maturity results add to the “significant weight of evidence” proving that, beyond a handful of high-risk strategies, UK retail structured products have consistently delivered for investors with very few exceptions.
Lowes added: “The defined returns nature of these bank-backed contracts is such that they will rarely disappoint other than in very extreme circumstances. Of course, it should be noted that structured products don’t guarantee a positive return – deposit-based products aside, even the most vanilla structured investments could give rise to capital losses in very adverse circumstances.
“In our view, based on the evidence, all financial planners and advisers should be seriously considering structured products for clients’ portfolios, as part of their diversified investment strategy.”
The Five-Year Performance Review 2024 can be found HERE.
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