UK - A specialist asset management firm has been launched the UK to tap into the growing interest towards structured products.
Called Blue Sky Asset Management, the firm is in no way connected to Blue Sky Group, manager of the KLM Royal Dutch Airlines' pension fund in the Netherlands, but the creation of Chris Taylor, formerly director of structured products distribution at HSBC Investments and then managing director of the structured investments division at Dawnay Day Quantum, and Mark Dickson, also from HSBC Asset Management.
Much of the company's focus will be on the retail market and the growth of self-invested personal pensions (Sipps), but investment consultant have been showing increasing interest in structured products for use by pension funds, said Taylor.
"Some of the fundamental principles [of structured products] carry through the investment consultants world. From an investment case, pension funds are looking at a far wider range of multi-asset classes for their portfolios," said Taylor.
More specifically, he predicts the structured products market will grow significantly in 2008, as it is looking likely to exceed £7bn (€10bn) in 2007 and with the potential to reach £10bn next year, while the US market has seen assets under management rise from $45bn (€35bn) in 2005 to $65bn in 2006.
Blue Sky's service has only just received registration from the Financial Services Authority, but it is anticipated the firm will launch two or three products in January, two of which are likely to be in the "asset class space" said Taylor, while a third would be an "income solution" along with short and long-term bespoke solutions for clients who might be investing in enhanced indexation but are "looking for a little more around the edges".
Structured products have been under the spotlight in recent months, most notably receiving attention in Germany because of perceived underperformance and lack of liquidity during the credit crunch.
But Taylor disputes this view, arguing structured products are low risk in what can be very volatile markets, such as commodities pricing, while pension funds seeking long-term liquidity perhaps should not be invested in such products.
"Some investors feel they need liquidity, but if you are looking for long-term assets, you don't necessarily need structured products. Most structuring will now offer monthly liquidity, but there is no point in investing in something you don't necessarily need to pay more for," added Taylor.
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