None of the structured products maturing in the next few months is on course to turn a profit
Less than a third of the 19 most popular structured products maturing in the next few months are set to return investors' initial capital in full.
Of the 19 products, which attracted hundreds of millions of pounds from investors, only five will return 100% of capital invested and not one has even matched inflation, let alone made any profit, according to Chelsea Financial Services.
Canada Life International's Platinum Income Series Four bond has underperformed the index on which its returns are based, the Nasdaq 100, by some 4% due to its heavy downside gearing. At current levels, investors face a 67% loss compared with 63% had they invested directly in the index.
Darius McDermott, managing director of Chelsea Financial Services, said: 'Capital in the Canada Life bond has been completely wiped out and the total return is entirely made out of the guaranteed growth or income. The majority are returning more than the market though. For example, the NDF/Abbey Extra Income & Growth Plan 1 has beaten the Dow Jones Eurostoxx Index, on which its returns are based, by around 50%.'
A key issue for investors has been the apparent disparity between the attention paid to headline income and growth rates and downside risks in the advertising of the products.
McDermott noted NDF is to send investors an annual breakdown of how their structured product investments are faring ahead of the introduction of similar requirements by the FSA.
He also questioned the wisdom of KeyData's recently launched Japanese Dynamic Growth Plan, the returns of which are based on the Nikkei 225. The index reached a 25-year low earlier this month, McDermott said, and the economy has been hurt by recession for well over a decade.
£300bn of liabilities
View from the front row
Transfer from occupational scheme
Appointed by FCA and PSR boards