Experts: Introduction - A wider range of instruments.

(From Professional Wealth Management (PWM))

Byline: Yann Thomas

Due to its vigorous growth, the structured products industry is now facing new challenges. The old times, when basic principal protected products indexed on the S&P500 were successful and matching most distributors' or investors' requirements, are now over.

This could only be a good sign for the industry and its sustainability. The degree of knowledge of most players on the buy side - especially in the wealth management universe - has significantly increased and most structured product selectors or investors are pushing providers to generate new and performance-based solutions.

Until recently, the number of eligible underlying instruments for structured products was very limited. Innovation lay mostly in issuing very sophisticated payoffs on those very common underlyings. Today, most of the innovation and the added value from product providers consists of giving access to alpha-generating asset classes or underlyings.

Market appetite for usual index-linked products or traditional interest rate derivative-linked products has significantly decreased among the wealth management community. The two main reasons behind this fall are:

- Private banks have no competitive advantage to launch those products as the market has already been saturated by them.