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Only 1 per cent of structured products lost money in 2014

by International Commercial Investment on January 20, 2015

Source: What Investment

The vast majority (93 per cent) of structured products that matured in 2014 returned a profit, with only 1 per cent losing money for investors, according to research from 

The research covered all 470 products distributed by financial advisers that matured last year, and found that no product that was linked to the FTSE 100 index produced a negative return. 

Most structured products sold to UK investors are linked to the performance of the FTSE 100 index. Terms and conditions differ, but FTSE 100-linked products commonly deliver a positive return if the index is higher at the end of the term – usually five or six years – than it was at the start. If the index is lower, many structured products will return investors’ money in full without a gain. 

Across the whole gamut of products, the average annualised return was 7.35 per cent, compared to 6.72 per cent in 2013.

Among ‘capital-at-risk’ products, which carry the risk of investors losing money in very adverse market conditions (for example, if the FTSE 100 falls by 40 per cent over a six-year term) the average return was 8.99 per cent, identical to 2013. 

‘It is indisputable that structured products maturing in 2014 have, in general, performed very well for investors,’ said Ian Lowes, founder ‘Given that the investments protected capital against all but the most extreme market conditions, for the FTSE 100 linked capital-at-risk products to return an average annualised gain of 8.99 per cent is extremely impressive.’

The average term of products maturing in 2014 was four years.

This reflects the fact that ‘auto-calls’ made up almost a third of all the products in the research. Auto-calls, also known as ‘kick-out plans’, generally have a maximum term of five or six years, but can mature early under certain conditions, typically if the FTSE 100 reaches a certain pre-defined level.

Looking at the auto-calls maturing in 2014, the average annualised return was 9.14 per cent, ‘comfortably the best performing of all the investment types’, according to Lowes, who added, ‘With their early maturity features, auto-call products have the potential to benefit from shorter-term market rises.’

While the overwhelming majority of structured products maturing in 2014 generated a gain, 5 per cent returned investors’ capital with no profit. ‘Given that many of these commenced prior to the credit crisis crash they have protected capital from some of the worst market conditions for generations,’ Lowes insisted.

Only 1 per cent of products returned a loss, among them products linked to baskets of commodities or individual stocks rather than the FTSE 100 index. 

However, it was a product of this type that produced the best overall return of all: the Meteor FTSE 5 Enhanced Quarterly Defensive February 2013 plan, which offered a gain of 4.85 per cent per quarter provided that five shares closed no more than 15 per cent below their initial prices, matured after one year with a gain of 19.4 per cent.


International Commercial InvestmentOnly 1 per cent of structured products lost money in 2014