Why Autocall structured products are an evidence-based opportunity for clients

By Ian Lowes, former Financial Adviser and owner of IFA firm Lowes Financial Management

Financial planning rests on assumptions about longevity, inflation and investment returns. We temper these with actuarial tables, market context and past performance, accepting that reality may diverge from our best estimates.

In this environment, instruments offering clearly defined outcomes – even when timing remains uncertain – deserve serious consideration.

For advisers seeking to deliver clarity and resilience in client portfolios, autocall structured products warrant a fresh look.

How Autocalls work

An autocall is a fixed-term contract issued by a major financial institution, typically linked to the FTSE 100 or its structured-product equivalent, the FTSE Custom 100 Synthetic 3.5% Fixed Dividend Index (FTSE CSDI). The structure offers early maturity when pre-set conditions are met on scheduled observation dates.

If the trigger is met – for example, the index is at or above its start level – the plan kicks out, returning capital plus a fixed coupon for each full year held (commonly 6-10% per annum, depending on terms).

If not, the plan continues testing at the next observation date. This “many bites at the cherry” feature means autocalls don’t require immediate market strength; they simply need the trigger met on any future observation date.

Most UK retail autocalls now use end-of-term capital protection barriers, commonly set at 60-70% of the start level. If the plan doesn’t mature early and the index finishes below the barrier on the final day, capital is at risk in line with the index fall. If the barrier holds, capital is returned even if no trigger was met.

Evidence

In 2025 alone, 338 UK retail FTSE-linked, capital-at-risk autocalls matured. Every single one returned capital plus profit, delivering an average annualised return of 7.85% over an average term of just under two years. Even the bottom quartile achieved 6.54% per annum, while the top quartile reached 9.33%.

Zooming out to the decade-long view strengthens the case. From 2016 to 2025, more than 2,000 maturities were analysed. Of these, 99.7% delivered positive returns, with zero capital losses when held to term. Average annualised returns across the decade stood at 7.44%, with an average duration of 2.3 years. This consistency persisted through Brexit uncertainty, the COVID-19 pandemic, inflationary shocks and geopolitical tensions.

Contrast this with UK-domiciled funds, no single fund delivered 7% growth in every calendar year over the same period*.

While some global and thematic sectors achieved strong returns, UK-focused funds averaged just 5-6% per annum*.

Autocalls, by design, mature in positive conditions and remain in force during negative years, providing returns according to pre-set terms—a structural advantage that explains their consistent performance.

Current market conditions

The FTSE 100 began 2026 by briefly crossing 10,000 for the first time, following a year of record-setting closes.

In these conditions, new autocalls could mature early on their first or second anniversaries. If a correction arrives first, autocalls still have multiple later opportunities to deliver defined returns once markets recover—precisely when longer durations prove their worth.

For structured products specifically, the FTSE CSDI was designed to remove dividend uncertainty for issuers, often translating into enhanced coupons for investors while remaining highly correlated with the FTSE 100.

In 2025, FTSE CSDI-linked autocalls outperformed their FTSE 100 counterparts by 1.84% per annum—a meaningful premium that underscores this index’s value in product design.

Portfolio integration and client suitability

Autocalls complement equities, bonds and cash by introducing structured outcomes that moderate behavioural impulses to chase recent winners or disinvest during downturns.

They can deliver equity-like returns from falling, flat or modestly positive markets, not just strong bull runs. With capital protection barriers typically at 60-70%, they offer downside protection that direct equity exposure cannot match.

Suitable clients include cautious/balanced investors seeking defined outcomes rather than open-ended upside; income or total-return seekers comfortable with capital-at-risk structures; and diversifiers wanting rules-based equity exposure that doesn’t rely on strong growth.

The key is matching product shape to client circumstances. Level designs for mainstream positioning, step-downs for enhanced maturity probability, defensive variants for lower risk tolerance, and hurdles for clients seeking higher returns with longer expected durations.

Selection criteria

When evaluating autocalls, consider trigger design and call frequency – earlier first call dates and step-down triggers raise maturity likelihood. Assess barrier depth and style, understanding how European-style barriers (tested only at term end) provide resilience against mid-term volatility.

Pay close attention to counterparty diversification; autocalls are senior unsecured debt of the issuing bank, and credit risk cannot be eliminated. In 2025, leading issuers included HSBC, Morgan Stanley, Citigroup, BNP Paribas and Barclays—spreading exposure across counterparties mitigates but does not remove risk.

Critical risks

Transparency about risks is essential. Returns depend entirely on issuer solvency; structured notes are not covered by Financial Services Compensation Scheme (FSCS) protection like bank deposits.

Market risk means that if no early maturity occurs and the index finishes below the barrier at term end, capital loss typically mirrors the index fall.

Liquidity may be limited – notes aren’t exchange-listed, and early surrender is at the issuer’s discretion, potentially resulting in returns less than the amount invested.

Adviser opportunity

For more than two decades, autocalls have delivered defined outcomes through their repeatable mechanics and multiple maturity opportunities.

The data speaks clearly: consistent returns above 7% per annum, resilience through major market shocks, and 99.7% positive maturities over a decade.

For advisers committed to delivering robust, understandable outcomes in uncertain markets, autocalls are not just an option – they are an evidence-based opportunity worth integrating into diversified client portfolios.

*Sources:

Trustnet (FE Analytics): Articles on consistent UK funds, top performers, and sector reviews (2025–2026 publications).

Morningstar UK: Fund performance data and category averages.

Investment Association (IA): Sector statistics and definitions.

Yodelar Insights: Sector return summaries for 2025 and multi-year periods.

Interactive Investor (ii.co.uk): Analyses of UK fund performance and consistency.

This material is for information purposes only. Past performance is not a reliable indicator of future performance. Investments carry a risk to capital and returns are not guaranteed.