Are the infamous structured products such as accumulators making a return to high-net-worth investors' portfolios?
Yes and no, according to wealth managers in Hong Kong.
When the risk appetite of investors is low, there is typically less desire for risky structured products. Not surprisingly, given the financial crisis, client activity in structured products was slow last year. But margins increased temporarily in the first half as volatility shot up to record levels.
Renewed interest since then has seen a return to these investment vehicles, albeit in simpler structured products with well-known underlying assets and shorter tenors.
As Enid Yip, chief executive for Asia at Sarasin Rabo Investment Management, notes: 'We are seeing some Asian clients buying simple, short-dated equity linked notes [ELNs, selling puts] for yield enhancement, since deposits have a near-zero return.'
At the beginning of last year, investors transferred their assets into cash. Then they moved into cash bonds, taking credit risk on familiar names and enjoying the yield that this market was providing.
As the yield shrank, they started to look for better returns. Initially, they played the equity markets, which had a good run until last April. But uncertainty since has driven them to seek diversification and better returns in structured products.