Lowes Financial Management has won a friendly challenge with the Investment Association (formerly the Investment Management Association -IMA) that pitted its selection of structured products against the fund trade body's selected index tracker.
In 2011, the Investment Association published research which sought to criticise structured products claiming that tracker funds were a better alternative. The research compared an HSBC FTSE 100 tracker fund with NS&I Guaranteed Equity bonds. The IMA reported that in nine out of 10 years the tracker would outperform and used this to suggest its research exposed the reality of structured products as an investment vehicle.
Believing the comparison was not wholly appropriate and also ignored the benefit of protection afforded by most structured products, Lowes countered the IMA research with its own, using real world examples, and showed a very different story.
Lowes and others in the market felt structured products were being portrayed in an unfair way and the IFA put forward its own research based on past performance data. The UK Structured Products Association (UKSPA) said at the time that the IMA research 'contained many flawed assumptions about structured deposits in general and challenged the association to produce evidence that any provider is selling GEBs on the basis that there are no fees or charges'.
The Newcastle-based independent financial adviser offered the IMA a friendly challenge in which it pitted a portfolio of five structured products of its choosing against a low-cost tracker selected by them. At conclusion of the challenge, in December 2017, the tracker had risen by 62.55% net of fees and the Lowes portfolio had risen by 81.11%. The Investment Association "gracefully conceded defeat" and in settlement of the 'wager' made a contribution to one of Lowes' supported charities.
The new chief executive of the IMA, Chris Cummings, congratulated the Lowes team on the basis that 'it's important that we all encourage good savings habits and help people to start investing'. Cumming agreed to donate £250 to a charity of Lowes' choice'.
"While the wager was made as a sporting challenge, we see it as a great fillip that as an Independent Financial Advice firm we were able to prove not only the value of structured products - and the flaws in the IMA's report - but verified our own knowledge, skills and experience in selecting structured products," said Ian Lowes (pictured), managing director at Lowes Financial Management.
Given that the structured products had predefined returns for the full range of market conditions, including contingent capital protection, the firm was "confident at the time that, other than in extreme market conditions, or the default of a counterparty bank, our portfolio would outperform the tracker fund", according to Lowes.
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