BANKS have been dipping their toes into the structured-product market again, after the market for these instruments took a battering following the bankruptcy of investment bank Lehman Brothers in September last year.
But the structured products that the banks are offering now lean towards the low-risk and are easier to understand.
Banks say that the demand coming from investors is more for structured deposits, which are seen to be a lower-risk form of a structured product. The principal is usually returned to customers at maturity, with interest.
Mr Lim Wyson, head of Wealth Management Singapore at OCBC Bank, said that equity-linked structured-deposit products with a shorter tenure of two to three years are fairly popular.
Equity-linked structured deposits are linked to the performance of certain stocks.
'The demand for such equity-linked structured-deposit products remains healthy, as many investors view such products as an alternative to investing in the equities markets which tend to be volatile at the moment,' said Mr Lim.
OCBC added that it has been selling structured deposits for the past six months and plans to launch more products depending on demand.
POSB has launched at least three structured deposits this year, said a spokesman. The latest yesterday was the launch of a five-year, equity-linked structured deposit where investors will receive their principal back if the deposit is held to maturity.
The POSB Invest SingGrowth Account is linked to four local blue-chip companies, namely SingTel, United Overseas Bank (UOB), Singapore Press Holdings and Sembcorp Industries. It offers yearly fixed payouts, with an attractive first-year payout of 2.78 per cent.
Mr Davy Wee, managing director and head of POSB, said the bank hopes to 'reach out to customers who wish to stay invested and still have peace of mind'.
The product is low-risk, and allows customers with spare cash to grow their money steadily, he added.
In the wake of criticisms over how structured products were aggressively sold to investors and that the products were far too complicated to understand, banks have been making changes on those fronts.
POSB has highlighted tips on investment in its advertisements so that customers can consider for themselves what kind of investment is suitable for their needs, said Mr Wee.
OCBC and UOB reiterate that they perform risk-profiling of their customers to assess their risk appetite before recommending a product.
OCBC, for instance, has stepped up efforts to improve its sales and the way it deals with customers across different product classes, 'in view of unprecedented market developments over the sale of investment products', said Mr Lim.
'Key areas that have been strengthened include refresher training and certification to raise the level of professionalism of its sales and marketing staff and holistic customer engagement at different life stages,' he said.
Still, financial planners and investors are somewhat wary of venturing into the structured-product market.
Mr Leong Sze Hian, president of the Society of Financial Service Professionals, warned: 'Since structured deposits were introduced in Singapore in 1999, they have generally provided very low returns.'?
Mr Leong reckons that because a large proportion of the fund invested is kept aside to make sure that the principal is returned to the customer,?there may not be enough invested separately to generate very high returns.
He pointed out that investors who are risk-adverse can still get about 2 plus per cent with a fixed deposit.
Mr Leong added that it is quite likely the stock market can rise - which means that investors could well be better off putting their money in a globally diversified portfolio of funds than betting on structured deposits.
Another disadvantage of structured deposits is that the funds are tied up for a few years.
Mr K.W. Chan, 50, who works in the real estate industry, said: 'The interest rates offered by structured deposits are not attractive enough to lock up this money.'
He said he would rather put his money in a bank fixed deposit and be content with the lower interest rates.
'The lock-up period is too long. Between now and two years later, there is a possibility that interest rates may go up.'
Another investor, Ms Luo Meiling, 25, said she will consider investing in structured deposits, though she does not have a very good impression of the instruments because of the debacle surrounding the Lehman-linked structured products.
