Structured Products: not a get-rich-quick scheme.
A recent article in the South China Morning Post would have you believe that structured products are now hard to find in Hong Kong but the facts are structured products remain very much available to everyday investors, albeit in a different form than before.
Structured products encompass a wide range of products, from very simple, aka vanilla, offerings tied to household names you trust, to hyper exotic structures with complex underlyings.
Although you may not be able to waltz into a bank and demand an accumulator product with a prospectus thicker than a bible, investors can still access simpler equity linked investments (ELI) and deposits (ELD) which were largely untouched by regulations brought on by the global financial crisis, and rightfully so.
At the height of structured products' popularity in Hong Kong, products beyond the proper comprehension of some sales staff were improperly sold to retirees who invested their entire life savings.
Since then, only simpler structured products are available, and here Hong Kong's regulators have done the right thing. Far from shrinking, the ELI market had grown in terms of number of products from 283 in 2008 to 699 in 2012 (based on the latest statistics from our database).
Structured products at their core should not be viewed as a get-rich-quick scheme. They form an integral part of any balanced and diversified portfolio. When used correctly, structured products can work wonders, offering upsides on underlying assets, without the risk exposure typically associated with direct investments. They allow access to assets and markets which investors would not normally be able to reach due to their limited means.
Kris Deslagmeulder is Head of APAC at StructuredRetailProducts.com. Connect with him here.