Demand for Skandia’s Protected Portfolio Investment (PPI) fund has increased nearly two-fold this year, suggesting that structured products are proving a popular investment solution for investors who are nervous about equity investments following the stock market volatility.
The most recent figures from Skandia show a 152% increase in inflows during the first quarter of 2008 compared to the same period in 2007.
Structured products are an alternative investment solution that should be considered for investors who are concerned about losing their capital. These investors can either build a portfolio of funds based on a long-term strategic asset allocation that is in line with their individual risk profile, investment objective and timeframe; alternatively another option is a structured product that enables them to benefit from some of the investment growth but with the added reassurance that their capital is protected against any downturn. The key for advisers is to balance their clients’ appetite for loss with their expectations for gains.
Although products offering protection are often thought of as options for bear markets, in fact they can have a role to play for some clients no matter what the market conditions. Skandia’s protected portfolio investments are structured to maximise the opportunities for growth alongside security for the capital. Unlike the majority of the structured products available in the market, actively managed funds are used to determine growth rather than passive indices. So when market conditions start to improve, clients will still have the potential to benefit from stock market growth.
“The key principle of any investment strategy is understanding the client’s attitude to risk and for some clients, an investment that allows them to enjoy growth should markets rise with a safety net of up to 100% capital protection at the end of the investment term should markets fall, suits their risk needs. The recent market volatility is clearly making the idea of protecting their initial investment even more appealing to many investors and, as a result, over the last quarter we have seen significant interested in our structured products,” says Graham Bentley, head of investment marketing, Skandia.
There are many options and opportunities available for investment and before selecting a product it is best to seek financial advice. This is not a guaranteed product.