At the height of the financial markets, private banking clients were seduced by the seeming ability of structured products to provide both clever capital protection and higher returns. But as the financial crisis erupted, secondary markets quickly evaporated. Issuing banks would not buy products back and nobody could tell clients how much these illiquid products were now worth.
As a result, clients quickly moved funds into safer and more liquid assets and as the crisis unfolded, according to Société Générale, cash and cash alternatives soon accounted for an average 80% of its private banking clients' investment portfolios.
