The Global use of Structured Products Increases to USD $7 trillion

29-Jan-2020 - 3-minutes

By - By Abraham Robertson and Ben Streater

Global use of Structured Products is on the rise by wealthy investors and institutions. Late last year Bloomberg reported that the $7 trillion Structured Product market now makes up 1% of the $700 trillion derivatives market.

At $7 trillion, the Structured Products market is larger than both the global ETF market ($5.3 trillion) and Hedge Fund market ($2.9 trillion). Investors are increasingly looking to structured products to enhance portfolio income in a low interest rate environment and to preserve capital at the top of the economic cycle.

But in Australia, Structured Products rarely receive a mention or allocation. While these products are issued by globally respected organisations such as Société Générale, access has been limited to private bank clients.  

The global rise in popularity of Structured Products is in part due to the back-to-basics simplicity of equity linked products coupled with the search for yield in a low interest rate environment. As SRP, the global association for Structured Products noted in a 2015 paper, the failure of complex credit products during the Lehman Brothers collapse has urged investors to shy away from overly complex structures and refocus on cost-efficiency and functionality. 

Both Bloomberg and SRP have reported that following the global financial crisis investors retreated from Structured Products, especially more exotic instruments. However, over the past few years, particularly in Europe and the USA, there has been a resurgence in the use of simplified structures that provide thematic or tactical investment strategies. 

Back at home, investors experienced the same grief during the financial crisis when a number of complex structured products failed to deliver their expected returns. However, those types of instruments are no longer preferred by manufacturers as the AFR noted in an article in 2016. Globally, investors are favouring Structured Products that offer capital preservation and income enhancement. These are the types of Structured Products Stropro has been designing with Issuers and offering to wholesale investors in Australia. 

To support the growth in Australia, Stropro’s platform provides multi-issuer access, portfolio reporting, increased transparency and improved liquidity – all of which have been investor pain points in the past. 

If you are interested to learn more, we encourage you to subscribe to our newsletter and if you are a wholesale investor then we encourage you to register on our platform and review our investment opportunities.

Abraham is a Co-founder and Director of Stropro and Ben is the Chief Product Officer. This article is for educational purposes and is not a substitute for professional and tailored financial advice. This article expresses the views of the authors at a point in time, which may change in the future with no obligation on Stropro or the author to publicly update these views