T. Bailey fund manager Jason Britton believes that struct-ured products will play a bigger role in fund of funds offerings as managers look to add value at different stages in the market.
The firm is one of several fund of fund managers which incorporate structured products in a bid to garner stronger returns.
Britton says: “What they do is add value and reduce risk. We currently have a 2 per cent holding in an auto-callable structure within our cautious fund and 4 per cent within a mega-cap structure that sees us collect 170 per cent of the upside of the top 20 stocks in the FTSE 100.”
An auto-callable is a market-linked investment that can mature before the scheduled date if it achieves predetermined market conditions. The auto-call test on these conditions is usually carried out annually or quarterly.
Williams de Broe head of Assetmaster Laurence Boyle says his firm has seven diff-erent structured vehicles acr-oss its multi-manager range, including auto-callables.
He says: “The simple reason behind the use of structured products is to exploit the current asset classes out there. At present, bonds look unattractive, property is backed up and embattled with liquidity problems while equities are subject to huge volatility.”