Despite some believing the US structured products market would see the demise of the reverse convertible payoff in the past few months, the start of the year has seen an even bigger push by the banks to sell these structure types.
An insider at an investment bank in the US said that it sees the reverse convertible as a highly attractive proposition to investors. "Much of the investing retail sector looks at structured products as a way of deriving income on a frequent basis which they would normally look to do through other investment types," he said. "You cannot derive this income from other investment types due to such low interest rates."
The source also said that income-returning structured products such as reverse convertibles are one of the only solutions currently available for those who want payments on a monthly or quarterly basis.
SRP.com data shows that in 2012 there are already twice as many reverse convertibles as any other payoff, namely 223. The average sales volume of a reverse convertible this year is $1.5m. RBC, UBS, Bank of Montreal and JPMorgan Chase are by far the most active providers in reverse convertibles this year.