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Counterparty call may bring more openness

Increasing investor demand for transparent counterparty disclosure may drive changes for the structured product industry, according to Bestinvest.

Bestinvest senior investment adviser Adrian Lowcock said more investors want to know the identity of counterparties as their trust falters in major banking institutions and this may force more open disclosure in the market.

He said: “There is going to be greater pressure to name the counterparty so investors may end up driving the market. They are the people buying the products and if the IFAs do not know the counterparty they will not be able to sell the product confidently.”

AWD Chase de Vere head of structured product and protection research Julie Smith said: “I would not put anything on panel unless I knew the counterparty and what the structure was but I keep that information and it is embargoed. I do not tell the adviser who it is but they know I am happy who the counterparty is and its financial strength.”

Smith said public offer rules block disclosing this information. She added: “If you look at the example of Lehmans, they had a good S&P rating and CDS levels were not too poor but overall, even knowing who the counterparty was, you were in no better position than not knowing.”

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