Ebook Building a Case for Structured Investments
Investment advisors today face a variety of challenges when it comes to building and managing portfolios for their clients. Each investor has individualized goals and needs. Each investor has a unique view of what the optimal mix of risk and reward should be. Each investor needs to balance the desire for growth against the need to control or reduce the risk of losses.
In recent years, the arsenal of investment tools advisors have had at their disposal has grown beyond the traditional mix of stocks, bonds, and cash equivalent investments. Alternative investments, including hedge funds and private equity, have become increasingly popular among wealthy investors. The number and variety of ETFs has exploded. Real estate investment trusts (REITs) have become a mainstream investment choice. And, over the past several years, Structured Investments have become part of the mix.
Structured Investments have long been popular in Europe and Asia, and over the past several years, they have started to gain acceptance among U.S. investors. According to the Structured Products Association, nearly $64 billion in new products were issued in 2006, up from $48 billion in 2005. Nearly half of the products launched in 2006 were intended for the retail investor. Despite this impressive growth rate, the prevalence of Structured Investments within U.S. investors? portfolios remains relatively low. Consider that in Europe and Asia, it is not uncommon for investors to allocate up to 30% of their portfolios to Structured Investments.
What holding back broader acceptance of Structured Investments? The primary roadblock seems to be awareness and education. U.S. investors simply are not familiar with the majority of these investments. In fact, according to a 2007 report from Spectrem Group, a Chicago?based strategic consulting firm specializing in the affluent and retirement markets, only 15% of affluent investors understand Structured Investments.
This report examines the role that Structured Investments can play in a diversified portfolio and how they can help meet a variety of objectives, including risk reduction. This report defines the most common types of Structured Investments available today and discusses the benefits and risks of each type of investment, along with practical applications on how they can be incorporated into actual portfolio allocations across multiple asset classes. The goal is to build greater awareness of Structured Investments by educating registered representatives and investment advisors, as well as their clients, about the potential benefits of a strategic allocation to these products.
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