The structured products market in the U.S. has grown by 20%, according to data released at the Structured Products Association's recent Innovations in the Structured Products Industry conference at the New York Stock Exchange.
The sideways movement of the equity market caused the upsurge in structured product placement in the U.S., according to SPA Chairman Keith Styrcula. It created an increased demand for structured investments such as equity-linked notes. "Uncertain securities markets often drive demand for structured products with built-in protective features," he said.
Innovation is a major factor driving the market, according to conference speakers. Eric Glicksman, a managing director in the equity-linked products division at Wachovia, emphasized the need to innovate with major market shifts. "You need to continuously innovate in order to re-engineer problem children," he said, referring to products with low market share in a high growth market, "and to move them back into to stars," or high market share products in a high growth market.
Styrcula said, "Innovation is the lifeblood of the structured products business." Inevitably, changes in broad-based market conditions could cause a structure to fall into obsolescence, he said, but a new twist to the structure could extend its useful life by several years.
