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IMA takes up challenge on structured v tracker

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

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 will run from June 23 this year to the end of December 2017.

Lowes has chosen five products on the firm’s recommended list – the Morgan Stanley FTSE defensive digital growth plan 4, Morgan Stanley FTSE kick out growth plan 11, Gilliat growth multiplier June 2011 edition, Investec FTSE 100 geared returns plan 26 – option 2 and Meteor dynamic FTSE growth plan 2 – investment plan.

The IMA has selected the HSBC FTSE 100 index fund.

Where a structured product matures before the end date, it will be 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 and 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: “It will take more than six years to conclude this challenge but 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.”

An IMA spokeswoman says: “The IMA accepted the challenge from Ian Lowes on the basis that it contributed to a healthy debate about structured products and funds.

“But it will not be possible to read too much into the result in 2017 as it is just one marketdependent example.”


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