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Risk rating launch for UK structured products

Risk rating launch for UK structured products

Industry body has launched risk ratings for UK structured products to help advisers compare them.

Zak De Mariveles, chairman of the UK Structured Products Association, said “While our members are very clear at describing key risks in their product literature, there has been no alphanumberic risk value assigned to each product such as is available within the funds industry.”

A 17-page UKSPA document, Understanding UKSPA Risk Ratings for Structured Products, said that the market risk of a product would be denoted using numbers ranging from 1 to 7, while its level of credit risk would be gauged using letters from A to G.

A product with a 1A rating could be classed as low risk, while a 7G rating would be the highest level of credit and market risk.

The document said that other dangers associated with structured products, such as liquidity and inflation risk, should be clearly described in investor-facing materials.

Adviser view

Dominic Basilea, director at Hertfordshire-based Aqua Wealth Management, said: “It is extremely difficult to compare products when there is not one that is similar to the other.”