Learn the basics of structured products: what they are, types of products, their risks and benefits, and how they work.
More resources to learn about structured products:
Structured products represent an add-on to classic investments such as stocks or bonds. They provide investors with different risk profiles and work in any market scenario. Some of their key benefits are outlined below:
One of the key features of structured products is that they typically offer some form of capital protection. Depending on your preferences, structured investments are available that completely minimise risk exposure.
Structured products can also provide a higher yield in sideways markets.
Structured products can give leveraged exposure to markets.
BMO Capital Markets is a leading, full-service North America-based financial services provider offering equity and debt underwriting, corporate lending and project financing, merger and acquisitions advisory services, securitisation, treasury management, market risk management, debt and equity research and institutional sales and trading. BMO Capital Markets has approximately 2,400 professionals in 30 locations around the world, including 16 offices in North America. BMO Capital Markets is a member of BMO Financial Group (NYSE, TSX: BMO), one of the largest diversified financial services providers in North America with US$532.1 billion total assets and over 45,000 employees as at January 31 2017.
Société Générale is one of the largest European financial services groups. Based on a diversified universal banking model, the group combines financial solidity with a strategy of sustainable growth, and aims to be the reference for relationship banking, recognised in its markets, close to clients, and chosen for the quality and commitment of its teams. Société Générale’s teams offer advice and services to individual, corporate and institutional customers in three core businesses: retail banking in France; international retail banking, insurance and financial services to corporate; and corporate and investment banking, private banking, asset management and securities services.
The Swedish Structured Investment Products Association (SPIS) was formed in 2008 as part of the Swedish Securities Dealers Association. The aim was to create common guidelines for the marketing material of structured products, these guidelines resulted in the SPIS industry code. SPIS main mission is to promote a healthy, efficient and competitive market for structured products, and SPIS works continuously to increase investors, regulators and other community stakeholders confidence in the industry by promoting transparency, comparability and understanding of structured investments.
The UK Structured Products Association (UKSPA) is a membership organisation established in 2009 by the leading manufacturers of structured products in the UK. It has grown to 16 members today, who represent a significant majority of the overall UK structured products market. The UKSPA provides a unified voice for its members, working with regulators, financial advisers and other trade bodies. It serves a number of important functions including engaging with regulators, developing best practice guidelines, educating the investment community and providing a useful source of information for manufacturers, financial advisers and retail investors within the UK.
When a retail investor buys a structured product, the bank is never their rival. The bank that issues the product actually enables the customer to invest based on a certain market trend. The bank itself adopts a risk-neutral position and hedges its payout obligation by engaging in countertrading on the capital market. It is of no importance to the bank whether the investor is investing based on rising, falling or sideways markets. The issuer only makes its money from the structuring of the financial instrument and from trading in that product. Consequently, it does not make any financial difference to the bank whether the investor gains or loses.
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