European retail structured products market doubles
European retail investors bought €270bn ($398bn) in structured products last year, double the estimated size of the market in 2005, according to financial consultancy Greenwich Associates.
The figure is based on reported sales volumes at 115 private and savings banks, insurers and fund managers in 14 European countries in the 12 months to October 2007.
The consultancy extrapolated from that figure to come up with an estimated total for the entire market, which includes about 200 active distributors of retail structured products.
Greenwich consultant Andrew Awad said it was a conservative estimate, taking into account input from a range of banks that sell structured products.
The figure does not include direct sales by product manufacturers or listed products that are bought on exchanges. A report by business publisher Risk Waters and Société Générale in February 2006 estimated the size of the market to be €135bn.
Volumes are expected to continue to grow as retail structured products become more mainstream and accessible, while market conditions have also played a part, according to Lauren Ash, a director in the retail structured products group at Citigroup.
Ash said: “Over the past eight months, there has been increased demand for capital protection but investors have also been looking to take advantage of short-term volatility.”
Greenwich said products with an equity underlying represented 70% of reported volume, followed by fixed income at 22%, foreign exchange at 3% and commodities at 2%. It said, however, that these proportions are likely to change.
Future demand for equity underlying is expected to be 44%, compared with 20% for commodities, 9% for alternatives, 4% for fixed income and 3% foreign exchange.
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