Structure products are back in the market under various labels names; IFAs skeptical about such products
Various mutual fund houses and banks are launching structured products; one popular variant of late is capital protection funds. However, IFAs are not so enthusiastic about such funds. They no longer want to suggest structured products to their clients after witnessing the poor returns of such products during 2007-2008.
Currently, a number of players like Birla Sun life AMC, Citigroup, Morgan Stanley, Religare Macquarie and Nomura are offering such products. In spite of a commission of around 3% from the product manufacturer, IFAs are not keen on selling these products.
“We are not excited about these products and we are not advising anybody to invest in such products. These products performed poorly during 2007-2208. I prefer advising my clients to put their money in pure debt or equity products,” said Suresh Sadagopan, a renowned IFA.
Structured products are available in the form of debentures that have returns linked to underlying stock indices such as the Nifty, interest rates such as the Mibor or baskets of stocks. A variant is fixed term funds which are primarily debt funds.
In 2007, players like HSBC AMC, JM Financial, Benchmark Asset Management, ICICI Prudential, DSP Merrill Lynch, Kotak Mahindra Group and HDFC Asset Management had launched structured products. Many investors failed to recover even their principal amount in such funds.
“Many investors are unaware that these products have a lock-in period. After witnessing the 2007 results of investing in structured products, IFAs do not want to incur such a risk again,” said Dinesh Khemlani, Partner Comsol.
IFAs feel that FMPs, equity and debt funds are safer place to park investor’s money. “We are not suggesting structured products to clients. We are instead advising clients to invest in FMPs and hybrid products,” said Rajesh Jha, CEO, Jain Investment.
