Privately Profitable but Socially Useless – An argument against many Structured Products

In his great book „Between Debt and the Devil„, Adair Turner writes

In fact financial markets when left to free-market forces, can generate activity that is privately profitable but not socially useful. There can be too much finance, too much trading, and too much  market completition.

and

numerous studies have shown that much active asset management adds no additional value but does add significant cost, compared with passive index-linked strategies

This made me think of the fee structure of tracker certificates (structured products) which are set up for a period of 2-4 years and cost* 3% issuing premium and 1.5% p.a. management fee to average over 2% costs, depending on the situation.

That cost is definitely not socially useful and will always reduce the investors performance substantially, espacially in low interest rate environments, like we see now.

It’s my job  to reduce these costs for clients. If you’d like to discuss more, please write me at mz@zuberbuehler-associates.ch .

*these costs were shown to me by an issuer of such a strcutured product tracker certificate

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