The number of investors choosing structured products has risen by 20% over the past five years, new research has shown.
According to the UK Structured Products Association (UKSPA), 25% of respondents now hold structured products compared to 20% in 2016. The most popular structured product was found to be the FTSE Kickout, designed to outperform cash even with modest falls in the FTSE 100.
The industry association said the results showed that many investors believe that markets such as the FTSE 100 may not rise over the medium-term.
Nearly half (49%) of those surveyed said they were happy to leave a portion of their money invested for five to 10 years in order to achieve their financial goals. Three fifths (60%) are interested in equity indices like the FTSE 100 but only half of those expect indices to rise over the next five to 10 years.
UKSPA said investors who want exposure but are not confident in their performance over the medium term may be attracted to structured products that offer the chance for returns even if markets do not perform.
Zak de Mariveles, chairman of UKSPA, said: “Since we first started conducting our research into the needs of UK investors in 2016, we’ve documented a consistent trend in the increased use of structured products across all types of investor, from the least experienced to the most knowledgeable.
“And all evidence points to this trend continuing into the future, as the low rate environment persists and investors consider alternative options that are better matched to deliver the outcomes they are seeking.”
UKSPA said its research showed growing interest in investments, with 45% of all those surveyed having actively invested in the past two years, compared to 35% in 2017. The amount being invested on average has jumped from £122,000 in 2016 to £164,000 in 2021.
A range of different risk profiles was found to be the most popular approach, with investors typically wishing to fully protect around 40% of their assets against losses while having some element of protection for 30%, no protection for 19% of assets and willing to put more than their capital at risk for 11% of assets.
ESG was also found to be a growing focus, the research found, with half of all respondents wanting at least 50% of their portfolio to be in ESG investments. The most important driver of interest into the sector was performance, but risk/return and personal reasons also ranked as key factors.
Image: scott-graham-5fNmWej4tAA-unsplash
