Investing in
structured products

Structured products provide investors with a pre-determined risk/return profile
Investors can select their market view and get a return besides buying or shorting the asset
Bullish market
Neutral market
Bearish market
They allow investors to shape the distribution of their portfolio returns
Capital protection
Distribution of daily returns of capital protected products
  • Average return is below that of a direct investment
  • No negative returns
Yield increase
Distribution of daily returns of yield enhancement products
  • Average return is above that of a direct investment
  • Small probability of extreme negative returns
Distribution of daily returns of leverage products
  • Higher average return
  • Extreme results more likely
Pros and cons of investing in structured products
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    Capital protection

    Structured products typically offer some form of capital protection. Depending on the investor’s preferences, structured investments are available to completely minimise risk exposure.

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    Yield enhancement

    Structured products can offer a higher yield on sideways markets.

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    Market access

    Investors can easily gain access to a new market or asset class that wasn't available through domestic securities.

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    Exchange risk management

    Buying structured products or structured notes denominated in the portfolio currency can reduce exchange risk.

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    Structured products can give leveraged exposure to markets.

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    Shorting/range trades

    Investors benefit from falling or range-bound markets.

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    Market risk

    The return from the investment is zero or even negative due to adverse market conditions. Investment advice on future market trends is needed to ensure the payoff is understood and reflects that view.

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    Counterparty risk

    The investment issuer does not repay the principal or return. An assessment of the issuer’s credit rating and of any other relevant information (credit default spreads, balance sheet strength...) are needed.

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    Liquidity risk

    There is only one market maker for the investment who does not provide an after-sales market or quotes a wide bid-offer spread. There are only buy-only investments where the issuer commits to making a competitive aftersales market in a place that is visible to the investor or their adviser.

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    Credit risk

    If the asset goes bankrupt, for example, the bond issuer within a portfolio does not repay the principal. Investors should assess the creditworthiness of the assets the solution is linked to (if disclosed) and their credit ratings.