Quick, now, what’s the fastest growing investment class in the United States?
Precisely right: structured products. Go ahead, fall in love with them — but don’t get too attached to their generic, misleading moniker. Because if Keith Styrcula, chair of the Structured Products Association, has his way, these dynamic, multi-faceted vehicles may soon have a new name: the more illustrative “structured investments,” perhaps, or even “enhanced investments.”
And Styrcula might very well get his way, or at least lead the way to such change. As founder of both SPA and his own New York City-based Structured Funds Advisors, he’s the go-to guy when it comes to SPs.
Widely popular in Europe, structured products overlay an additional feature onto an underlying investment to, for example, provide principal protection. In retail portfolios, they are typically used to reduce risk — though they can also add risk. In the former scenario, SPs give downside protection to equities and can also be linked to fixed-income, commodities or derivatives.
Keith Styrcula, Principal, Structured Funds Advisors, New York City; Founder-chair, Structured Products Association, New York City
Why he wants to call structured products something else: “‘Structured products’ is a horrible name. ‘Structured’ sounds complicated, and ‘products’ sounds like something’s being pushed.”
Styrcula, 46, has been focused on SPs since the 1990s, and his advisory is one of only a few here geared to help mutual fund and ETF companies break into the structured products business. Most of his clients are non-U.S. firms seeking to enter the American SP industry.
Smart financial advisors, increasingly, are getting hip to SPs.
“We’re seeing a very big upturn in interest among advisors in using structured investments, [but] we’ve got a lot of work to do” to educate them. “There are times when they’re not appropriate for portfolios. For instance, if a structured investment isn’t held to maturity, you might not get the full benefit of principal protection,” says Styrcula, a.k.a. Stephen Rhodes. That’s the name he uses in his other business: writing financial thrillers like the bestselling The Velocity of Money (Morrow/Avon).
But the world of structured products is the innovative Styrcula’s main concern. At UBS back in the late ’90s, he devised the first structured product linked to the Dow Jones Industrial Average. Later, he created the Structured Solutions unit at JP Morgan Chase before leaving to orchestrate his own SP transactions.
At his almost two-year-old advisory, Styrcula works with about a dozen partners, firms such as Macquarie Bank of Australia, Canada’s CIBC, Claymore Securities and Wachovia. He brings these entities together and arranges the transactions on a pro rata basis.