Packaged retail investment product, PRIP (also referred to in German, more rarely investment product for retail investors)
Financial product that – is typically offered to retail customers, – participates in the performance of one or more assets, and – has a certain degree of complexity. – PRIPs in this sense are primarily certificates, derivatives, mutual funds, real estate funds and unit-linked life insurance (even though there is no rigid definition of PRIPs and they take a variety of legal forms, they may well be distinguished by the broadly comparable functions they perform for retail investors. PRIPs characteristically combine exposures to multiple underlying assets; they are designed to deliver capital accumulation over a medium- to long-term investment period; they entail a degree of investment risk, although some provide capital guarantees; and they are normally marketed directly to retail investors. Broadly speaking, they can be categorized into four groups: investment funds, insurance-based investment products, retail structured securities and structured term deposits). – The markets for PRIPs have so far been characterized by considerable information asymmetries between issuers and distributors on the one hand and retail investors on the other. This lack of transparency leads to investor detriment at the micro level, when products are bought or sold contrary to the actual wishes of customers. At the macro level, there is a risk that investors will suddenly withdraw from the markets when prices fall. – Cf. BaFin Annual Report 2009, p. 61 f. (EU legislative initiative on consumer protection), Financial Stability Report 2012, p. 92 ff. (non-transparent over-the-counter market harbors risks).
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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
E-mail address: info@ekrah.com
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