Investments 

Maturing structured products returned 5% in Q2

Capital ‘protected’ products and structured deposits distributed through the IFA market that matured in the second quarter of 2014 returned an average annualised gain of 4.99 per cent over an average term of 4.6 years, according to StructuredProductReview.com.

This is 54 per cent higher than the returns of maturing structured deposits and capital ‘protected’ products in the comparative quarter last year, where the average annualised return was 3.23 per cent per annum over 4.5 years.

Ian Lowes, managing director of Lowes Financial Management and founder of StructuredProductReview.com, said: “Especially given the prevailing interest rates, I struggle to envisage any sensible investor being anything other than extremely satisfied with a return of 4.99 per cent a year on cash-like investments.

“While providers are slashing their super Isa rates, structured deposits and capital ‘protected’ products may offer an alternative to traditional cash investing.”

The best performing FTSE-linked product in this range, the Investec FTSE 100 protected growth plan 7, matured after five years with a gain of 55.31 per cent, or 9.2 per cent per annum.

“Such figures make a mockery of the suggestion that structured products fail to perform,” stated Mr Lowes, adding that “those offered via the IFA channel have certainly delivered.”

The review website also noted that even the bottom 25 per cent of maturities in the quarter returned an average annualised gain of 1.48 per cent over an average term of 5.82 years.

At the other end of the spectrum, the top 25 per cent of maturities returned on average 8.38 per cent per annum over an average term of 5.06 years

Mr Lowes pointed out that whilst Bank of England base rate was cut to 0.5 per cent more than five years ago, it is accepted that many such products offered at that time had higher potential returns than those on offer today.

He said: “However with some current product offerings giving investors the potential to earn over 7 per cent per annum in the right market conditions, deposit based and capital ‘protected’ structured products have the potential to again significantly out-perform other cash-like investments.

“For me, this warrants a place for capital ‘protected’ products and structured deposits in an investor’s portfolio as a compliment to more traditional investments.”