As their popularity rises, structured products are to come under closer scrutiny amid concerns about their lack of transparency.
The products have also come under fire for the fact advisers do not track their performance as closely as a managed fund.
Research house Morningstar said while it had been tracking the performance of some structured products, it would create individual product databases from next year.
Morningstar would not be rating or recommending structured products, but would be tracking returns and making observations on how they worked, Morningstar head of adviser and research, Anthony Serhan said.
“And just like people need to keep track of their normal managed funds, it makes sense that they want to track these products,” he said.
By putting structured products on a database, they would hopefully be open to the same transparency and criticism as a managed fund, vocal critic of structured products – Select Asset Management chief investment officer, Dominic McCormick said.
“Advisers promote and investors invest in [structured products]… but [advisers] do not really scrutinise how they are going the same way they are scrutinising the performance of their other funds,” McCormick said.
JPMorgan vice president of equity derivatives and structured products David Jones-Prichard welcomed Morningstar’s move.
“Anything that encourages transparency in structured products is a good thing. It is something we are all striving to do, as part of our education process to advisers and investors,” Jones-Prichard said.
Banks globally have been ravaged by $510 billion in losses, partly because of structured products known as collateralised debt obligations.
