Barclays: Apac investors seek yield beyond equities as hybrid structures rise

Equity-linked products continue to dominate structured product issuance across many Asian markets, driven by investor demand for enhanced income, familiarity with underlying stocks and the ability to express market views through customised investment solutions, according to Thomas Bord (pictured), head of equity EXO & hybrid structuring, Apac at Barclays.

We expect renewed interest in hybrid and credit-linked structures as investors seek to maintain attractive yields with a more defensive risk profile - Thomas Bord

From an investor perspective, equity-linked structures offer an attractive alternative to traditional fixed income products, particularly as investors continue to seek higher levels of income. While high-grade bonds typically deliver mid-single-digit yields, equity-linked notes can offer potentially higher returns, at times reaching upper single- to double-digit levels depending on market conditions.

“Equity-linked notes are also often seen as an alternative to direct equity investment, providing income through coupons, embedded leverage and soft capital protection features,” Bord said.

Asian investors are generally comfortable with equity markets and often have a strong preference for selecting individual stocks. The ability to use physical settlement in many equity-linked structures, providing the option of receiving shares following a downside event, remains an important feature for investors willing to hold the underlying through market drawdowns and participate in a potential recovery.

From a market infrastructure perspective, APAC benefits from a highly efficient structured product ecosystem, with more automated execution processes supporting high issuance volumes, rapid turnover and timely execution across a broad universe of global equity underlyings.

Over the past year, Bord has observed increased demand for diversification and convexity as equity valuations have remained elevated. Investors have shown greater willingness to pay a premium for structures that offer improved downside management, while demand has also grown for hybrid structures combining different asset classes.

“Hybrid structures, particularly equity-FX and equity-rates combinations, have seen increased interest, often implemented through capital-protected formats as vanilla bond yields continue to compress,” he said.

Rate-linked products adapt

The higher interest rate environment has also influenced demand for rate-linked structured products in Asia. Elevated rates have improved the economics of capital-protected rate-linked notes through greater zero-coupon accretion, while encouraging demand for simpler structures designed to monetise carry.

Investors have increasingly favoured shorter-dated solutions such as range accruals or capped and floored coupon structures. As expectations have shifted towards eventual rate cuts, demand has focused on locking in current yield levels while limiting duration exposure.

Gold demand grows

Commodities continue to represent a smaller share of structured product underlyings compared with equities in markets such as Hong Kong and Singapore. According to Bord, one of the challenges is that many commodity underlyings are futures-based, making them subject to roll yield and term structure effects.

However, demand for precious metals has increased significantly. Gold, and to some extent silver, benefited from heightened geopolitical uncertainty, continued central bank purchases and periods of US dollar weakness alongside expectations of easier monetary policy.

Investor appetite for gold and silver ETFs increased notably, with gold-related products also becoming some of the more actively used commodity underlyings in structured products.

Drivers of future growth

Looking ahead, Bord expects hybrid and credit-linked structures to attract greater attention as investors seek to maintain attractive yields while adopting a more defensive risk profile.

As short-term interest rates continue to normalise from the highs seen in 2023 and early 2024, these structures could provide investors with a way to target high-single-digit yields while retaining capital protection features compared with traditional equity yield products.

Beyond traditional asset classes, crypto ETFs could also emerge as an area of future product development as investors continue to explore new sources of diversification and return.

“Looking ahead, we expect renewed interest in hybrid and credit-linked structures as investors seek to maintain attractive yields with a more defensive risk profile,” Bord said.

This is an abstract of the SRP Asset Class Report 2026 which is available for download here.

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