SPA Conference: Investors look for diversification when shopping for commodity-linked products

By LLuvia Mares

New York, Oct. 16 - The advantages of diversification are opening more doors for commodity-linked securities in the structured products market, according to a panel of guest speakers Tuesday at the Structured Products Association's third annual summit in New York.

The conference kicked off with what association chairman Keith Styrcula called an "intense" morning session on commodity-linked products and forecasts for their increasingly popular following by investment professionals.

Matt O'Connor, senior vice president at Lehman Brothers, said during the conference that commodities have transformed from being a products primarily for money managers and high net worth investors to a product of choice within the investment community.

"They are mainly looking for diversification," said O'Connor. "Obviously the high returns of commodities are of interest to the people."

Kathy Kriskey of UBS said at the summit that the prices of the underlying commodities are hitting historical highs.

"Obviously we are in an absolute high priced environment with a historical high and commodities continue to hit that historical high," she said. "We need to take advantage of this momentum the volatility and the fact that you want to be able to go long or short."

In addition, some buyers are looking for structured products that give them access to multiple assets.

"We have seen more interest by investors wanting to go across assets to have a product that will deal with equities, fixed income and commodities all at once," she said.

In response, Kriskey said banks are trying to give investors what they want by developing products that can successfully combine several assets.

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