He says: “We recommend using our investment plans as part of a diversified portfolio. With low interest-rates and after a long equity bull market, investors may want to consider a more defensive equity investment which many of these plans can provide.
In addition, for those approaching retirement or already in drawdown, our investment plans can offer equity-like defined returns by foregoing dividends and uncapped equity upside, but potentially mitigating the sequencing risk of large falls in the equity market which can have a devastating effect on portfolios.”
He goes on to add: "Defined returns with defined risks should be appealing for most investors. After all, just under 7 per cent compounded over 10 years will double an investor’s portfolio and we feel these investments have a high probability of generating those returns.”
Economic outlook
The case for structured products could be further strengthened by the economic outlook.
As mentioned previously, many commentators and experts feel a continuation of the market returns achieved over the past decade is highly unlikely, and with the political and economic unrest caused by the likes of Brexit and the US/China trade war, many in fact anticipate that markets could head the other way, for a period at least.
Clearly, if global markets suffer similar drops to those seen in the aftermath of the 2008 global financial crisis, then a number of structured product investor may see their capital returned and nothing on top, and we could even see some losses.
However, investors expecting less severe market falls may see sense in using structured products within their portfolios.
Mr Johal says: “While I hesitate to forecast where markets will go from here, if the current conservative economic outlook leads to side-ways or range-bound equity markets, structured investments are likely to perform exceedingly well on a risk-adjusted basis over the medium term.
Many commentators bemoan the fact that everything is currently expensive, so the potential to deliver returns of 6 per cent plus with a high degree of probability warrants attention.”
Mr Taylor echoes Mr Johal’s views.
He adds: “The bottom line is that it’s most advisers' expectation that it’s going to be harder to make such strong returns for clients in the next 10 years as were enjoyed in the previous.
"If markets become range bound/sideways moving , or even correct, alpha from active fund management may encounter a challenging period, while passive funds will of course follow the market and also be range bound/sideways moving.
