Are structured products investors' new haven?

Political and economic tensions continue to rise, leaving investors in a state of uncertainty as they seek positive returns in such volatile times. To address this challenge, structured products have emerged as a sought-after solution, offering investors a guaranteed pay-off profile with downside protection. Brian McMillan, Head of Retail Sales at Investec Structured Products, sheds light on the growing uptake of these products among both retail and institutional investors. Structured products provide investors with exposure to the market while minimizing the risk of significant losses. These financial instruments come with various terms and conditions, including capital protection on the downside and potential caps on returns to balance the risk-reward ratio. With markets showing limited upside potential, investors are increasingly attracted to structured products as a means of safeguarding their investments. Contrary to hedge funds, structured products are more accessible to a wider range of investors due to their capital protection features. Retail investors can start investing in structured products with relatively modest sums, making them a viable option for a broader audience. The popularity of structured products has been steadily growing over the past few years, with annual growth rates estimated at around 20-30%. In South Africa alone, the market size for structured products has reached approximately 20 to 30 billion rand, indicating a significant increase in demand. One of the key advantages of structured products is their potential for attractive returns that outperform inflation rates. These products offer investors the opportunity to benefit from equity growth while limiting downside risks. For instance, products like the East Asian basket provide returns that are twice the growth of the market within a specific range, offering investors the possibility of doubling their returns. While the maximum return on certain products may be capped, structured products present an appealing investment option for individuals looking to achieve steady returns over a defined period. Moreover, structured products allow investors to diversify their portfolios across various markets globally. While the focus has predominantly been on developed markets in recent years, the inclusion of emerging markets in some products indicates a shift towards diversification. By offering exposure to a mix of developed and emerging market indices, structured products enable investors to capitalize on potential growth opportunities in different regions. In a recent interview with CNBC Africa, Brian McMillan highlighted the benefits and growth trends of structured products, emphasizing their role in providing investors with a balanced investment strategy amidst economic uncertainties. With the increasing demand for capital protection and stable returns, structured products have become a new haven for investors navigating volatile markets. As market conditions continue to evolve, structured products offer a structured approach to investment management, combining downside protection with growth potential to meet the diverse needs of investors.