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Trade body concedes defeat in 6-year challenge

Lowes Financial management has won a friendly challenge with the IMA that pitted its selection of structured products against an IMA selected index tracker.

Ian Lowes, managing director of Lowes Financial Management, tells how the challenge started.

“In 2011, the Investment Management Association (now the Investment Association) published research which sought to criticise structured products claiming that tracker funds were a better alternative.

“The research compared an HSBC FTSE 100 tracker fund with NS&I Guaranteed Equity bonds. The IMA reported that in 9 out of 10 years the tracker would outperform and used this to suggest its research exposed the reality of structured products as an investment vehicle.

“We believed the comparison was not wholly appropriate and also ignored the benefit of protection afforded by most structured products, so we countered the IMA research with our own, using real world examples, and showed a very different story.

“We and others in the market, felt structured products were being portrayed in an unfair way so we put forward our own research based on past performance data.

“We offered the IMA a friendly challenge in which we pitted a portfolio of five structured products chosen by us against a low-cost tracker selected by the trade body.

“Given that the structured products had predefined returns for the full range of market conditions, including contingent capital protection, we were confident at the time that, other than in extreme market conditions, or the default of a counterparty bank, our portfolio would outperform the tracker fund.

“Indeed, that is what happened. At conclusion of the challenge, in December 2017, the tracker had risen by 62.55% net of fees and the Lowes portfolio had risen by 81.11%. The Investment Association gracefully conceded defeat and in settlement of the ‘wager’ made a generous contribution to one of the charities supported by Lowes Financial Management.

“We received this message from Chris: ‘Congratulations to Ian and his team. It’s important that we all encourage good savings habits and help people to start investing. We are donating £250 to a charity of Ian’s choice to congratulate him and all at Lowes’.

“While the wager was made as a sporting challenge, we see it as a great fillip that as an Independent Fihttp://www.structuredproductreview.comnancial Advice firm we were able to prove not only the value of structured products – and the flaws in the IMA’s report – but verified our own knowledge, skills and experience in selecting structured products.”

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