Despite intense scrutiny of structured products following the collapse of Lehman Brothers, and the more recent meltdown of structured product provider Keydata Investment Services, UK retail structured product sales grew by 47 per cent in 2009.
Industry data from StructuredRetailProducts.com shows that annual UK retail structured product sales grew to a record £13.3bn - compared with £9bn in 2008. Average growth over the last decade averaged 20.3 per cent per year, while total assets under management for the UK retail structured product industry now stand at £39.4bn.
The surge in growth comes in spite of intense scrutiny of the industry in 2009, which included an in depth review conducted by the Financial Services Authority (FSA). Following its investigation, the financial services watchdog found significant advice failings on Lehman-backed products in most of the financial advice firms sampled, as well as serious deficiencies in the marketing literature provided by a number of plan managers selling these products.
However, structured investment specialist Blue Sky Asset Management expects 2010 to mark the first year of a new decade of continued growth for these vehicles.
Sold by both high street banks and investment firms, structured products are essentially pre-packaged investment plans which deal in derivatives. They offer investors a predetermined return profile based on specific circumstances related to an index or underlying assets.
Chris Taylor, chief executive at Blue Sky, commented: "While, quite clearly, 2009 focused on the shortcomings of certain providers and their products, it is beyond doubt that structured investments are firmly established in the mainstream of investment options for investors. And the positive news, from investors' perspectives, is that the regulator's action and review in 2009 has left responsible providers in no doubt that nothing less than best industry practice is now acceptable."
Mr Taylor added that increasingly flexible and innovative strategies are coming forward on a more diversified range of underlying assets - highlighted by the fact that FTSE 100 product-linked issuance in December was just 61 per cent of the overall total.
■ The end of last year saw a number of UK retail structured product providers, including Citi, Credit Suisse, Legal & General, Morgan Stanley, Prudential, Royal Bank of Scotland, Santander and Skandia, unite to create the UK Structured Products Association. The key objective of the newly formed body is to inform and educate the investment community on structured products, aiming to demonstrate their value as investments.
