Getting out of equities is one way to go, but structured products are also being touted The majority of investors who have been trading in equity markets have reduced their leveraged positions, and discretionary portfolio managers are advising clients to reduce exposure to equities. 'We have cut down equity exposure in our client's portfolios,' said Ivan Leung, chief investment strategist in Asia for JPMorgan Private Bank in Hong Kong. 'We have rotated them into equity-linked structured products which have capital protection. 'We have decided on this because we don't see much upside in the stock market at present.' Mr Leung said that the bank had used more plain equity-linked structured notes with soft protection in discretionary portfolios in the past nine months. The bank is advising more cautious clients to avoid exotic products and consider plain structured products such as those with short volatility structures. These structures can be tailored according to investor preference on tenor, underlying stocks and indices. If the price of the underlying asset goes up, investors will get a coupon of about 15 to 20 per cent. But if the price of the asset goes down, investor's principal remains protected. 'We are offering more of these structures now as the market moves sideways or even goes down. Some investors have chosen to put their capital in cash instead.' However, not everyone agrees that principal protection is the only way to go. Fritz Man, head of investment consulting sales, North Asia at Sarasin Rabo Investment Management, said: 'I think the better way to play the market is not doing principal protection or even 100 per cent protection.' The cost of buying principal protection has become extremely high because United States interest rates have dropped significantly. Therefore, the performance of principal protected notes will probably be disappointing because little money is left to buy the options on the underlying assets. 'We are offering principal protected and partially protected products as well, driven by demand,' said Mr Man. 'But I think a better way to play in this bear market is to consider one product in which the principal protection is contingent on the performance of underlying assets.' Sarasin has structured some monthly auto-callable products with barriers. Provided the performance of the underlying indices or stocks do not drop below the fixed barrier levels, investors will be able to obtain a coupon at maturity plus the principal. But if the performance of the underlying assets drops below the fixed barrier level investors will not get their principal back.