Complex investment products shunned needlessly, says JP Morgan
The global financial crisis (GFC) has caused unnecessary concern around more complex investment products, leading investors to miss out on significant gains, according to JP Morgan.
The consequences of the GFC has increased investors' desire for simpler investments, said JP Morgan's executive director of equity derivatives and structured products, David Jones-Prichard. However, he feels there are a number of myths surrounding structured products, for example, that are incorrect.
"I would urge investors not to treat all less simple investment products in the same manner," he warned. "There are a number of more sophisticated investment products in the market that have been developed to meet specific investment needs, and then tried and tested to improve delivery of returns."
Jones-Prichard said structured products are created or 'structured' in such a way as to deliver on particular investment needs, which range from protection in volatile markets to income, growth, or a combination of all.
"There's a lot of misinformation surrounding this type of investment, including ideas that are outdated, don't apply to current products or are just plain wrong," Jones-Prichard said.
"There's also the broader misconception that all structured products are the same - which is no more the case than for any other investment type. No one would argue that all equities are the same or all property or all bonds are the same."
He said the quality of a product would depend on the soundness of its fundamentals, such as the bond protecting the investment and the potential for return on the underlying assets.
Jones-Prichard said there are a number of myths about structured products that are just not true, one of which is that they are always comprised of high risk assets "such as derivatives and futures, held together by questionable credit components such as non-guaranteed or hybrid bonds". He said the components of structured products could vary widely and have different levels of risk.
AUTHOR
Caroline Munro
Recommended for you
With Fortnum Private Wealth and Professional Financial Services now unified under the Entireti umbrella company, CEO Neil Younger has detailed to Money Management the firm’s new direction and future expansion.
The FAAA has suggested looking offshore for overseas financial advisers to ease the adviser shortage, but are employers willing to take on the burden of workplace visas?
There may be a huge influx of alternatives coming to the market, but timing and access difficulties mean advisers can easily end up disappointed with their selection, according to Morningstar global CIO Dan Kemp.
An NSW individual has pleaded guilty to one criminal charge of providing unlicensed financial services after promoting crypto investments at national seminars.
