Structured products available to financial advisers in the UK marked their strongest overall performance for five years, with 634 plans maturing, 98% of which produced positive returns for investors.
The data, published by StructuredProductReview.com in its
Five-Year Performance Review 2023, shows this was the highest number of maturities in the past five years, up 20% on 2021.
When averaging performance per year across all 634 maturing products – growth and income – the average annualised return equated to 6.45% a year, which is the highest average return over the five years. Clients invested in plans in the upper quartile would have seen an average annualised return of 8.97% a year and for the lowest quartile 3.99%.
Looking at FTSE only capital at risk autocalls, these delivered an average annualised return of 7.06%. Clients invested in plans in the upper quartile would have seen an average annualised return of 9.28% per year at maturity. Investors in lower quartile plans would have seen an average annualised return of 5.42% a year.
In the period, FTSE only income based deposits provided an average annualised upper quartile return of 4.40% and lower quartile of 3.51%, with an average across all products of 3.87%.
The remaining 2% of plans (10 products) that matured in the period were deposit based, returning investors capital. No maturing product in 2022 realised a capital loss for investors.
Commenting on the data, Ian Lowes, founder of StructuredProductReview.com, says: “2022 marked yet another positive year for structured products. This was despite being a period marked by volatility and uncertainty in both equity and bond markets, which left investors searching for direction.
“After 2021, a year in which markets returned to pre-pandemic highs, the resurgence of volatility in 2022 following Russia’s invasion of Ukraine, caused some serious headaches for investors.
“But investors who had diversified their portfolio with structured autocall products would not have had to be market watching that element of their investments, having the peace of mind that a market downturn deferring maturity could result in a higher return being achieved on recovery in a subsequent year.
“They simply needed to bide their time in the market, rather than trying to time the market. The latter, as we know, is more often a thankless task.
“The performance shows the value of structured products as diversifiers within client portfolios, helping to bring a sense of stability during times of market uncertainty. In our view, based on the evidence, all financial planners and advisers should be seriously considering structured products for their clients’ portfolios, as part of their diversified investment strategy.”
[Main image: chris-liverani-dBI_My696Rk-unsplash]
