The structured products challenge: Ian Lowes vs IMA

The Investment Management Association has accepted a challenge from IFA Ian Lowes to compare a portfolio of five structured products to a tracker of the IMA’s choosing.

The move comes after the IMA released a report in April which compared index trackers with National Savings & Investments guaranteed equity bonds. The IMA found tracker funds outperformed in nine out of 10 years and suggested its research “lays bare” the reality of many structured products.

However, the research was met with anger by Lowes, Barclays and many others in the industry who said a better exercise would have been to compare tracker funds with capital-at-risk structured products.

The challenge runs from June 23, 2011 to the end of December 2017. Lowes has chosen five products on its recommended list, the Morgan Stanley FTSE defensive digital growth plan 4, the Morgan Stanley FTSE kick out growth plan 11, Gilliat growth multiplier June 2011 edition, Investec FTSE 100 geared returns plan 26 – option 2 and the Meteor dynamic FTSE growth plan 2 – investment plan.

The IMA has selected the HSBC FTSE 100 index fund.

Other parameters include where a structured product matures before the end date it is assumed that 10 days after its maturity the proceeds are invested in the HSBC tracker without any initial charge.  Commission of 3 per cent was also built into the terms of the structured products- 3.5 per cent in the case of the Investec plan.  Therefore, an appropriate adjustment has been made in order to produce a fair comparison.

Lowes says: “Whilst it will take more than six years to conclude this challenge we are extremely excited about seeing how it develops and we hope that you share our interest in what will be a fascinating study of real-time examples of investment performance.”