Tags: structured | products

Structured Products in Fashion Again

By Dan Weil   |   Thursday, 28 May 2009 10:51 AM

The same structured products that caused investors hefty losses last year are again being peddled by Wall Street, and investors are buying.

These securities are supposed to provide reliable profits with limited risk. But in 2008, profits proved elusive while risk was unlimited for many of them.

They work well for financial advisors because fees are high.

Investors learned their lesson briefly. Purchases of structured products dropped 75 percent in the fourth quarter of 2008, to $5.9 billion, from the first quarter, according to research firm mtn-i, The Wall Street Journal reports.

But in the first quarter of this year, sales rebounded 7 percent from the fourth quarter, though they were still well below year-earlier levels.

"There's more appetite for them today than we had six months ago," Lori Heinel, who oversees structured products for Citi Private Bank, told The Wall Street Journal.

To be sure, investors now are interested in the safer end of the structured product market — principal protected notes.

Previously, investors had delved into reverse convertible bonds, which blew up big-time last year.

But even the safer structured products carry risk, the Journal notes. Investors who bought products backed by failed firms, such as Lehman Brothers, took big hits.

Structured products aren’t the only area where investors’ appetite for risk has returned. Experts see it happening across the board, led by stocks.

"Everything seems to be keying off U.S. equities," Nick Chamie, head of emerging markets research for RBC, tells Reuters.

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The same structured products that caused investors hefty losses last year are again being peddled by Wall Street, and investors are buying.These securities are supposed to provide reliable profits with limited risk. But in 2008, profits proved elusive while risk was...
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