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Falling rates pose challenge

Falling interest rates and concerns over counterparty risk present the biggest challenges for the structured product industry.

At a Money Marketing round table, providers acknowledged the challenges but were confident that they are nimble enough to weather the storm.

Morgan Stanley vice-president of UK structured products Marc Chamberlain said: “If there is a desire from clients, there are solutions to mitigate counterparty risk, for example, backing the product with gilts or collateralised structures. However, clients have to be aware that it will detract from the participation they get.”

Meteor Asset Management Philip Saunders said: “The lower that interest rates go, the more interesting it will be for structured products.”

Blue Sky Asset Management chief executive Chris Taylor said: “Falling interest rates present a challenge for structured products but it will also create more need because returns on cash will be diminished. The industry must respond with innovation, avoid smoke and mirrors and maintain and improve investment integrity.”


No repayment plan on interest-only

Nearly half of the UK’s 2.9 million interest-only mortgages have no specified investment vehicle to pay off the capital, according to research from LV= by CEBR.


Passive aggressive

Adviser Fund Index panellists cut the British equity weighting in the Aggressive index by 7 per cent at the latest rebalancing. The allocation fell from 35 per cent to just 28 per cent on November 1, despite the addition of several British funds, including Cazenove UK Absolute Target.


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