Andreas Bluemke is the author of How to Invest in Structured Products, the highly-rated guide to structured finance which currently features as the #1 book on our guide to the best structured products books.
Andreas has delighted us by providing some responses to our interview questions during February 2021, and we’re sparing no time in sharing that interview with you below.
Structured products are the endlessly interesting product of sophisticated financial engineering. Going by names such as ‘UK Kick Out Plan’ and the ‘Contingent Income Plan’, structured products blend traditional financial assets with derivatives to provide unique payoff profiles.
Due to their invisible inner workings, and multiple payoff scenarios, structured products can be difficult to understand and evaluate as a retail or professional investor, which is where Andreas’s book really helps by bringing clarity to this rarely written about asset class.
Here’s where How to Invest in Structured Products sits in the following finance book genre hierarchy:
Interview with Andreas Bluemke
Please could you tell us a little about your professional background and why you felt inspired to write the book?
Andreas: I am a structurer since 1998, when I launched my first product, “10 Uncommon Values” with Lehman Brothers, a since defunct company. It was a simple basket of stocks, but my previous experience with exotic OTC derivatives quickly led me to explore more advanced structures like Capital Protected Notes, Barrier Reverse Convertibles, and the like. Discovering and experimenting with novel structures is a very satisfying occupation, but convincing others of their value is truly rewarding. However, marketing these structures has ever been tricky, mainly because of the lack of understanding of the end-investors. At the time, there was no practical guide for investors, and I deemed this a lack in the market. Thus was born the project to write this book.
This title is a guide suitable for beginners. What drove you to write such a comprehensive guide compared to a more specialist title
Compendiums with hundreds of payoffs and structures abound, I use some myself. Yet it’s not the structures in themselves that are complex; it’s the skill to know when to use what structure, at which level to place a Barrier, what maturity to choose, and what not to do in any circumstance. A good structurer will show you a structure that makes sense and has logic behind it. In the book’s numerous “do’s and don’ts” chapters, I attempt to guide the interested investor like a lighthouse in a rough sea. Follow the book’s advice and you’ll never run your ship aground on a reef.
In the course of researching and writing your book – did you come across anything that surprised you?
The first finding was that European-style Barriers were much safer than American-style ones, because an investor never gets compensated for unforeseen events like flash-crashes. In those black-swan events, European Barriers hold, while American Barriers break. The second, more academic finding, was discovering the distinct shape of the distribution of returns of the three big classes of structured products, Capital Protection, Yield Enhancement and Participation. Embedding them in a framework allows you to build a portfolio of structured products. Using a questionnaire helps an investor determine his or her own preferred return distribution shape, and thus which type of products are suitable to him/her.
For budding financial writers, what is the one piece of advice would you give to those writing to educate beginners about investing?
If you don’t find what you’re looking for in the market and you think there’s a broader need for it – start writing. A genuine work will always find a publisher. And get help from your fellows to review your chapters; no matter how often you correct your own sentences and style, unless you’re Shakespeare’s great-great-grandson, you’re bound to overlook a mistake or typo.
And finally, I like to ask all authors; when saving and investing your own money, what is your preferred investing style?
There exists three mantras, when investing: 1) buy and hold, 2) buy low – sell high and 3) cut losses and let profits run.
After experimenting with the second, I currently use a mix of 1) and 3).