Structured products on hedge funds grow

Banks are trying, with mixed success so far, to interest institutional investors in structured products based on funds of hedge funds and hedge fund indices. For institutions that have been slow to obtain approval for alternative investments, structured products offer a quick fix. But suspicion abounds.

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MOST BANKS ARE eager to hitch their wagons to the hedge fund gravy train. Many are building up prime brokerage services and some are considering following in JPMorgan’s footsteps by buying hedge fund businesses. Another avenue for banks to profit from investors’ continuing interest is to offer structured products based on funds of hedge funds and, more recently, hedge fund indices.

Traditionally, such products have been popular with high-net-worth individual investors but banks are increasingly looking to institutional investors.

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