The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookies before using this site.

All material subject to strictly enforced copyright laws. © 2021 Euromoney, a part of the Euromoney Institutional Investor PLC.
Banking

Structured products: Keeping it simple

Investment banks are rushing to offer systematic payoffs and smart underlyings as structured notes, partly in response to investors’ growing mistrust of more complex products. But is replicating hedge fund strategies in note form as simple as they are trying to make out?

The power of research


eqder-main.gif

STRUCTURED NOTE SELLERS have good reason to reconsider the types of payoffs they offer investors. The credit crisis has lifted the lid on the can of worms that was the structured credit business. It has also had the knock-on effect of making investors wary of anything bearing the tag "structured", including complex equity-linked notes, which are far removed from the world of securitization.

Investors have also noted the underperformance of some of the more difficult to understand products, such as those that gave access to equity market correlation. Dealers say investors are signalling that they no longer want to sit through a lecture where every second word is "rho", "gamma" or "vega", but would rather hear an interesting but simple investment story that they can understand.

This has raised demand for less quantitative-driven and more transparent payoffs, say dealers, and has partly led to a shift away from highly complex products. Instead, banks are pushing a new generation of payoffs, some of which try to present, in note format, the type of alternative strategy usually only associated with hedge fund investing.


You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.

SUBSCRIBE ONLINE TODAY

Unlimited access to Euromoney.com and Asiamoney.com

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually

FREE 7 DAY TRIAL

Unlimited access to Euromoney.com and Asiamoney.com, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors

LOGIN NOW

Already a user?

We use cookies to provide a personalized site experience.
By continuing to use & browse the site you agree to our Privacy Policy.
I agree