15 January 2012

Danger of Structured Products - a Case Study

Two investors were recently awarded a multi-million arbitration award by a US court. The case illustrates the danger of putting too much trust in portfolio advisers. Investors should be particulary vigilant when presented with complicated, especially 'structured' investment products. The rule should be: what you cannot explain to your wife or grandmother in a few simple sentencies should not even be touched with the proverbial barge-pole. How many ordinary people - even those working in challenging professional jobs - do really understand municipal arbitrage strategies sold to the investors under the cryptic name ASTA/MAT? Investment Advisers offering such products are nothing else than salesman lured by the fast fees that are usually part of such 'products' and should be treated with a healthy amount of suspicion.