As the credit crunch continues to claim victims in the banking industry, the wealth management industry is keeping a close eye on what is happening to structured products, given worries about the financial strength of the institutions that underwrite these financial package deals.

The Swiss Structured Products Association has recently reported on the numbers and trading volume of structured products that are listed on the Structured Product Exchange (“Scoach”). Figures show a dramatic increase in the number.

As of the end of August, there were some 29,000 products listed on the German-Swiss exchange, surging from 18,700 a year earlier.

Interestingly, while the number of capital protected products has risen sharply over the year, these protected products represent a tiny portion of the total number of products listed with only 1,020 being traded at the exchange.

The majority of products are leverage products used mainly by insurance companies and product structurers but there are also 4,351 reverse convertibles and other yield enhancers - up from only 3,000 a year ago. This must represent a significant risk to private investors who have bought these products for their superior yield but will be, in many cases, left holding devalued shares or other underlying in place of their capital investment.

Julius Baer, Goldman Sachs, Vontobel, Deutsche Bank and Zurich Cantonal Bank accounted for some 80 per cent of recent new issues in the last year, with Zurich Cantonal Bank issuing nearly 20 per cent of the volume during the period of May through August. The value of structured products in Swiss Bank accounts was SFr320 billion at the end of June 2008 compared to SFr341 billion a year earlier.

Given the turmoil of September and the collapse of Lehman Brothers – who provided the protection for an as yet unconfirmed number of structured products issued in Switzerland – it is going to be interesting to see how many of these products are still around in the future.