Editor's letter

While they may still be the darling of the Asian market, in Europe range accrual notes are starting to fall out of their range

The cracks are starting to show in the world of structured products, particularly as the rewards that come from investing in stock indexes begin to fade. It stands to reason that disturbed and occasionally volatile equity markets that form the basis of many structured products cannot be good news.

The immediate impact of these falling markets has been felt most keenly in Europe in range accrual notes. While they may still be the darling of the Asian market, closer to home these notes are starting to fall out of their range. Depending on the structure, you can sell now and cut your losses. The other option is to hang on in there until maturity, although that may only be worth it if your structure includes a provision that allows you to go back into the range after you fall out.

Another cause for concern comes in the form of switching. In this case, it basically depends on how conscientious your distributor is. If he is responsible, then he will have phoned you up already and arranged new products for you to switch into to ensure that you don't get caught out.

And while you worry about all of this, you have also to remember that there are still mis-sellers around who continue to make their products sounds like Christmas has come early.

We were reliably informed at November's Structured Products Europe conference that it is possible to differentiate structured products from gambling. Croupiers do not educate their clients about the risks they are about to take, nor do they conduct tailored risk questionnaires. Responsible distributors do both of these things. The arrival of Mifid has further confirmed the obligation that distributors have to take that extra bit of care over how they sell investment products.

The results of the Structured Products Asia awards are published in this issue of the magazine. This year, in recognition of this fast-developing region, we have extended the range of our distributor awards from a single regional prize to a series of country awards. As with Europe, we also include an inaugural Structured Products House award.

Richard Jory, [e-mail], [phone].