Structured Edge in 2018

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Structured Edge in 2018

It was a record breaking year for the number of structured products issued in the UK market and published on Structured Edge. FVC has to date published 485 reports on the UK research service and 51 reports on the Offshore research service, the largest number of product reviews in 19 years of the service. FVC also reached 5000 reports on the UK research service, a milestone we were delighted to reach which illustrates the depth of the market and what our service has sought to achieve.

At the start of 2018 we launched our research service for the offshore market. Building on the reputation and concept of the UK research service this service has been well received and we hope to build on its success over the next year and continuing to help advisers manage the raising of market standards.

In 2018 we welcomed two new providers to the UK structured product market, Tempo Structured Products and Dura Capital. This brings the total to 10 active UK providers.

The start of 2018 also saw the introduction of European Regulation PRIIPs and with it the mandatory KID. For the UK research service we have included the PRIIPs risk rating and attached the important KID documents on our product reports. The risk rating is intended to bring a standardisation across asset classes and give advisers a metric to compare the risk of instruments including structured products with other asset classes, most obviously funds.

Capital protected structured products have so far either achieved a risk rating of 2 or 3 out of 7 with 96% of products achieving a 3.

The spread of the risk ratings for capital at risk products is wider as would be expected. Most products (68%) receive a risk rating of 4 with some falling into both the 3 and 5 brackets. Of the products receiving a 5 on the PRIIPS risk scale 67% were linked to more than one underlying. At the lower end of the scale 98% of the product gaining a risk rating of 3 were linked to a single underlying.

The success and benefits of the KID as well as the methodologies used are still being debated and the regulator ESMA is conducting a consultation period on its implementation. However, it is clear that the risk ratings and performance scenarios do not replace the need for further analysis and research into the risk profile and payoff of structured products.

FVC has some exciting developments for 2019 planned which we hope will enhance the Structured Edge research service. These include visualisation and comparison tools as well as in-life analysis and monitoring.

Tags: Investment PRIIPs Structured Edge

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