Altus argues that until UK investors fully understand the risks involved, structured products are not suitable for most retail investors. It claims the FSA did not go far enough in its guidelines on the sector.
Altus partner and founder Hercules Anastase says: “During 2009 high potential returns were possible from simple FTSE 100 structures. However, with volatility collapsing, the recent rally in equity markets, interest rates at virtually zero and with an improvement in bank credit levels, those returns will not be achievable again in 2010. This means more complex and sophisticated products with greater inherent risk are required to achieve greater potential returns.”
Anastase adds: “Until there is evidence of a greater level of understanding in the UK retail market of the risks associated with investing in these types of investments, their sales should be restricted. These more complex products are not appropriate in a retail market where volatility, correlation risk, delta, interest rate risk and soft-capital protection barrier risk are understood by few.”
Altus Financial creates bespoke structured investment products for high net worth individuals.