Intervening in the active / passive debate: introducing the concept of ‘alpha by contract’
The active / passive debate is probably the single, biggest ongoing conversation in the investment / wealth management industry and financial planning profession.
However, structured products aren’t generally considered to be part of the conversation … perhaps because the structured products sector and plan managers haven’t been speaking the right language.
Our white paper introduces the concept of ‘alpha by contract’, that structured products offer the potential for – and evidently can deliver – in ways and with risk / return profiles that neither active nor passive funds offer.
The potential to access and achieve ‘alpha by contract’ through structured products is thought-provoking:
The academic (efficient markets hypothesis, etc.) and real world case (it’s difficult to reliably identify tomorrow’s sources of alpha today; tomorrow’s sources of alpha are rarely reliable over the long term; and active fund management is generally expensive) for passive investing is obviously compelling.
Regardless of whether professional advisers believe in the quest for ‘alpha’ by active fund management or content themselves and their clients with the ‘beta’ of the market by passive fund management, with many professional advisers acknowledging the merits of utilising both within portfolios, surely we can all agree that everybody would like returns in excess of the market’s beta, if the fundamental challenges of accessing alpha by active fund management could be addressed.
This is where structured products can come in: structured products offer the potential for – and can evidently deliver – ‘alpha by contract’, in ways and with risk / return profiles that neither active nor passive funds offer or deliver, that could add material value within diversified portfolios, particularly in low to medium return, no return and / or moderately falling market environments.
As our white paper explains, the active / passive debate, and professional adviser and investor thinking, shouldn’t be limited to a simple narrative and binary consideration of just ‘alpha’ by active fund management and / or ‘beta’ by passive fund management.
Structured products can and should be seen as intervening in the active / passive debate, offering the potential for – and evidently able to deliver – ‘alpha by contract’, presenting compelling alternatives and / or complements to alpha by active fund management and / or beta by passive fund management as options for investors to include in better diversified portfolios.
Tempo-specific data for and summary of Tempo plan maturities
We launched our product suite in June 2018 and we have now launched more than 250 plans across our structured product and structured deposit suites.
Our plans started to reach their first potential kick-out points at the 3rd anniversary in June 2021 – and we have now seen 38 of our plans mature.
We produce a summary and provide granular analysis of the data which details the performance and risk / return profiles of our plan maturities, including identifying whether plans / plan options have generated ‘alpha by contract’, in addition to providing individual maturity performance and comparison overviews (‘MPACs’) for each matured plan.
Our summary, analysis and MPACs include: a reminder of the terms of each plan / plan option; details of the maturity performance and analysis; and comparisons to pertinent benchmarks (including: the index that the product was linked to, e.g., the FTSE 100 EWFD; the FTSE 100; and a FTSE 100 tracker fund, with dividends re-invested).
The data for and analysis of our plan maturities shows that they have deliveredimpressive returns to investors, including plans / plan options that generated ‘alpha by contract’, in ways and with compelling risk / return profiles that neither active nor passive funds offer.
0ur plan maturities adds to the sector-wide data that highlight the important USPs of structured products and evidence the efficacy of structured product and the potential merits of including structured products in diversified portfolios.
Tempo data and summary: Tempo plan maturities
Individual Tempo Maturity performance and comparisons ('Mpacs')
Our maturity performance and comparison overviews (‘MPACs’) provide: a reminder of the terms of each plan / plan option; details of the maturity performance and analysis; and comparisons to pertinent benchmarks (including: the index that the product was linked to, e.g., the FTSE 100 EWFD; the FTSE 100; and a FTSE 100 tracker fund, with dividends re-invested).
The maturity performance and comparison overviews (‘MPACs’) : highlight the significant and important USPs of structured products; evidence the efficacy of structured products; and shine a light on the potential merits of including structured products in diversified portfolios.
Mpac: Issue 10, LKO1
Mpac: Issue 9.2, LKO1
Mpac: Issue 9, LKO1
Mpac: Issue 15, LKO1
Mpac: Issue 15, LKO2
Mpac: Issue 15, LKO3
Mpac: Issue 14, LKO1
Mpac: Issue 14, LKO2
Mpac: Issue 14, LKO3
Mpac: Issue 13.2, LKO2
Mpac: Issue 13.2, LKO3
Mpac: Issue 13, LKO1
Mpac: Issue 13, LKO2
Mpac: Issue 13, LKO3
Mpac: Issue 12, LKO1
Mpac: Issue 12, LKO2
Mpac: Issue 12, LKO3
Mpac: Issue 11, LKO1
Mpac: Issue 11, LKO2
Mpac: Issue 11, LKO3
Mpac: Issue 8, LKO1
Mpac: Issue 7, LKO1
Mpac: Issue 6, LKO1
Mpac: Issue 5, LKO1
Mpac: Issue 5, LKO2
Mpac: Issue 5, LKO3
Mpac: Issue 4, LKO1
Mpac: Issue 4, LKO2
Mpac: Issue 4, LKO3
Mpac: Issue 3, LKO1
Mpac: Issue 3, LKO2
Mpac: Issue 3, LKO3
Mpac: Issue 2, LKO1
Mpac: Issue 2, LKO2
Mpac: Issue 2, LKO3
Mpac: Issue 1, LKO1
Quick links
WHITE PAPER: DIGITAL VERSION
Please click here to access the digital version of the white paper.
WHITE PAPER: PDF VERSION
Please click here to access the PDF version of the white paper.
WHITE PAPER: HARD COPIES
If you would like a hard copy of the white paper, please call us on 020 7391 4551 or email info@tempo-sp.com.
QUICK VIEW TEMPO EVIDENCE
Please click here to see a summary of the performance of Tempo’s plan maturities: 27 out of 38 have delivered ‘alpha by contract’ outcomes for investors, in ways and with risk / return profiles that neither active nor passive funds offer or deliver.
TALK TO US
If you would like to discuss the concept of ‘alpha by contract’ and how structured products can – and evidently do – interfere with the active / passive debate, please call us on 020 7391 4551 or email info@tempo-sp.com.