Cerulli Associates' recent report predicts substantial growth for structured notes, debt securities linked to underlying assets, in the upcoming year, prompting advisors to take heed of this emerging trend.
Despite their reputation for being illiquid, inaccessible, and costly, structured notes are gaining traction, with only about 22 percent of advisors currently incorporating them into their strategies, but the landscape is changing, with roughly 8 percent of advisors planning to adopt structured notes within the next year matching industry standards with the likes of hedge funds and private debt.
While alternative investments pose challenges for many clients, Cerulli's findings reveal advisors' concerns about the lack of liquidity and product complexity associated with structured notes, alongside hurdles related to expenses and subscription/redemption processes. Nonetheless, asset managers are adapting by targeting retail investors and partnering with advisory firms to introduce structured notes capabilities. Advisors could be missing out on a key alternative to improve the performance of clients portfolios.
Finsum: Liquidity concerns should come down as the interest rate schedule becomes more certain and advisors should consider assets that are traditionally less liquid such as structured notes.
- alts
- debt
- private credit
- real assets
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