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Tranche-based plans will be hit by Ucits III

Investment Design and Distribution managing director Clive Moore says tranche-based structured products will lose traction as investors turn to Ucits III structured funds.

The specialist structured product consultancy says traditional debt securities-based products could fade out by the end of the year.

Moore says: “By the end of the year, I would be surprised if there were many tranche-based structures out there. All the issues that the FSA addressed last year go away completely with Oeics as you have got transparency and you also have none of the professional indemnity insurance issues.

“Although you can do things slightly cheaper with tranche based issues and create tax-efficient structures, a lot have been put under pressure by both the FSA and the Revenue in terms of suitability.”

CitiFirst head of UK retail structured product sales Emma Davidson says: “We are definitely going to see a change but bec-ause the Ucits III fund is very regulated and more costly, the flexibility is not there that you might have with a structured product.

“On a bespoke basis, we will still see a lot of the tranche-based products but where you are appealing to the mass retail market and you have to placate the FSA, Ucits III is going to be the way it will go. I do not think the tranche-based approach will disappear, it will just change shape.”

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