HSBC is entering the guaranteed income bond market and expects to unveil its first offering in the new year.
Speaking at the Structured Retail Products Adviser seminar in London, HSBC Asset Management head of UK structured and specialist products Chris Taylor said while income products are a holy grail for the structured market, the current pricing environment means manufacturing them remains challenging for providers.
Taylor said just 1 per cent of recent structured product volumes are income-oriented because it is difficult for traditional product structures to provide good value for investors in the current market.
Taylor pointed out that income products are mainly for retired or retiring investors who can least afford to risk their capital or their income stream, yet many structured products targeted to meet their needs fail on one or even both these levels.
He said products offering unreliable income streams or those with, for example, 30 per cent soft protection are not necessarily good enough for investors. Instead, HSBC will bring out a guaranteed income bond product as a solution for IFAs to offer their income-seeking clients. This will compete with major players in the guaranteed income market, where HSBC believes choice has been limited.
Taylor told the seminar: “HSBC Asset Management will offer a straightforward guaranteed income bond solution from the new year, utilising HSBC Life. This will be the first time this wrapper will be available outside the internal distribution of the HSBC Group and is representative of the way forward for HSBC Asset Management.”