Providers of derivatives and structured products faced many challenges in the past year. The low rate policies of developed countries spurred investors’ search for yield and forced providers to explore new ways of yield enhancement. On the other hand, the volatility in equity markets presented an opportunity for structured products as tools to monetize and sell the risk.
In fact structured products and derivatives appear to be the best option for investors to generate alpha in this kind of market environment. However while many investors see the opportunities behind structured products and derivatives at present they still remember the role such products played in the global financial crisis (GFC). And although the stigma that stuck with derivatives and structured products post GFC have diminished in the past few years, the fear and trauma that comes with investing in such products linger in the minds of many investors who are still hesitant to use them.
But an evolution has been taking place in the structured products and derivatives space that has been under the radar of most investors. Such evolution is a promising development that may provide better and more sophisticated products truly designed for specific requirements of investors.
- How have structured products and derivatives evolved post the GFC?
- Why can structured products and derivatives be a tool for enhancing alpha in the portfolio?
- What structured products and derivatives are suitable for corporate and institutional investors?