EUROPE - The first part of 2006 showed very strong growth for structured products, according to BNP Paribas Equities & Derivatives.
But it warned the second half of the year would be much more challenging.
In its annual study on structured products the French bank revealed that the first part of this year was particularly active in Europe with good demand coming from Germany, Belgium, Holland the UK.
In Europe, most demand was for products strongly correlated to the performance of the stock market. However, in the US, distributors were still working to position structured products as a key asset class for private investors.
The study showed that providers have benefited in the last few years from stable and robust growth of all classes of shares.
This has favoured simple, growth-oriented products and also encouraged investors to explore other asset classes besides just stocks and bonds. In particular, there has been massive use of plain vanilla options, Asian stocks and momentum products. Commodities, property and emerging market shares have also become standard investments for some clients.
However, BNP warned that the popularity of this approach, based on a rising trend in the market, was likely to be short lived.
Pierre-Olivier Cailleton, an analyst specializing in structured products research for BNP Paribas Equities and Derivatives said: “With the brutal fall for most classes of shares during these past few weeks, the rising momentum seems to be finished.
“This could bring about a change in the way structured products are designed. Lock-in structures, regular yield or products de-correlated from the market trend will certainly win popularity in the second half of 2006.”