The structured products business in the United States is on track to generate $300 billion in sales this year, highlighting the rapid expansion of a market that was once relatively opaque to many investors.
Structured products generally combine a bank-issued obligation with a derivative, although that description does not capture the complexity of how these instruments are designed or their potential influence on market dynamics. Structured notes have attracted particular attention as investors seek ways to position themselves around the artificial intelligence trade.
The design of these products can allow market participants to capitalize on periods of turbulence, making them a notable vehicle for expressing views on fast-moving themes. Their growing use has also prompted broader interest in how they are created, how they work and why demand has increased so sharply over the past year.
In the latest episode of the Odd Lots podcast, Alex Micalizzi, international head of equity structured notes at Nomura, explains the mechanics of structured products and the factors behind the market’s recent growth.
Sources: Bloomberg Markets.