Structured products typically offer some form of capital protection. Depending on the investor’s preferences, structured investments are available to completely minimise risk exposure.
Structured products can offer a higher yield on sideways markets.
Investors can easily gain access to a new market or asset class that wasn't available through domestic securities.
Exchange risk management
Buying structured products or structured notes denominated in the portfolio currency can reduce exchange risk.
Structured products can give leveraged exposure to markets.
Investors benefit from falling or range-bound markets.
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.
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.
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.
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.