We also recognise that structured products can offer ‘Astute Alpha’
While our ‘core’ products are ’Deliberately Defensive’, there is no particular reason why structured products should all be designed to be lower risk than other investment options. Structured products can also be designed to focus on delivering alpha, in ways that active funds can’t and passive funds don’t.
We therefore provide wealth managers and professional advisers with the scope to discuss specialised products with us, which we describe as ‘Astute Alpha’.
But what do we mean by ‘Astute Alpha’?
- Returns that may require the market to rise: Firstly, ‘Astute Alpha’ products may require the stock market to rise, in order to generate positive returns (unlike our ‘Deliberately Defensive’ products). Of course, potential returns should therefore be higher, for investors prepared to take the risks commensurate with targeting such returns.
- The same downside risk as the market: Secondly, we think there is scope for wealth managers interested in specialist products that focus on alpha delivery and optimising potential upside to consider options that do so without downside protection – in other words, with the same downside risk as the market / index.
Notably, structured products equate to ‘investing by contract’, instead of being based on a fund manager’s aims, as is the case with active funds. This means that if a structured product is designed to offer alpha / market outperformance, then that is what it will do – subject to issuer / counterparty risk, instead of active fund management risk.
At a time when many investors are contemplating whether investment returns in the years ahead may be harder to achieve than in the years behind us, accessing ‘Astute Alpha’, through a structured product, may be an attractive and timely complement to active and passive funds, within well-diversified and balanced portfolios.