New research by Incapital shows that structured notes, particularly nonprincipal protected notes, will likely surpass structured certificates of deposit in terms of growth in 2013.
Incapital, a leading underwriter and distributor of fixed income and other financial products, polled nearly 100 financial professionals at its 2012 Structured Investments Conference in October, which assessed the overall sentiment of advisors about structured products and their perceived key attributes and challenges.
Advisors polled said the primary reason they are using structured products is to add equity exposure to clients’ portfolio (34%), while 26% felt that structured products were best used to replace plain vanilla income products such as CDs, and 20% use them for portfolio diversification.
“We’ve noticed a shift in investors’ appetite that is likely to continue into 2013, as more and more financial professionals are gravitating toward non- or partially-protected notes,” said Glenn Lotenberg, managing director at Incapital, in a statement. “Our survey found that in this low rate environment, advisors are incorporating them into investors’ portfolios as a more efficient way to enhance yield and as a means to build equity exposure.”
Additionally, the survey found that the greatest attribute of structured products is enhanced yield, with 42% of respondents finding them most valuable for that purpose. Principal protection, access to asset classes otherwise not available and the ability to customize structures followed as additional reasons, ranging as the key attribute for 15% to 17% of respondents.