Is Non-financial corporate bonds: the future for structured notes?

29 Nov

At deVere Group we have had and are having great success with the use of structured notes where appropriate for our clients.

Our clients currently have over a billion sterling invested in structured notes.  It’s been suggested recently that companies should consider issuing notes going forward.

Using non-financial corporate bonds instead of bank bonds to underpin structured products could encourage more investors to consider them, as it would help diversify the counter-party risk within a portfolio, some people believe. An effective way of diversifying a portfolio that contains structured products would be to diversify the counter-party risk away from financial institutions, according to some.

If say, instead of being backed by Barclays, Royal Bank of Scotland or Société Générale, a FTSE 100 note is backed by a Tesco bond, a National Grid bond or a General Electric bond, it opens up the opportunity for structured products to proliferate across a portfolio in a more usable and safer way it is thought. Spreading that counter-party risk beyond just the financial industry mitigates the downside of having undesirably high volumes of financial debt within the portfolio, and could see the continuing expansion of what is already a fast-growing part of the industry.

It’s certainly an interesting thought. What is for sure is that deVere intends to stay at the front of the industry in this exciting field.

Nigel Green deVere Group

Blog written November 29th

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