STRUCTURED PRODUCTS
Structured products are defined as products that are derived from and/or based on a single security or securities, a basket of stocks, an index, a commodity, debt issuance and/or a foreign currency, among other assets. They also include index and equity linked notes, term notes and units generally consisting of a contract to purchase equity and/or debt securities at a specific time.
A structured product is generally a pre-packaged investment strategy, which is based on derivatives, such as a single security, options, indices, commodities, debt issuances and/or foreign currencies, and swaps. It is important to point out the fact that there is no single, uniform definition of a structured product.
The following is a 100 USD example. An investor invests 100 USD, the issuer of the structured product then simply invests in a risk free bond, which has sufficient interest to grow to 100 after the 5 year period. This bond might have cost 80 USD and after 5 years it will grow to 100 USD. With the remaining funds the issuer purchases the options and swaps needed to perform, the prearranged investment strategy, this might be, investing in a basket of securities of Europe’s 50 largest companies.
Structured products were created to meet specific needs that are not met from the standardized financial instruments available in the markets. Structured products can be used as an alternative to a direct investment and, as part of the asset allocation process to reduce the risk exposure of a portfolio.
How can you benefit from Structured Products?
The benefits of structured products include:
Principal Protection
Tax-efficient access to fully taxable investments
Enhanced returns within an investment
Reduced volatility or risk within an investment
Please contact us for further information.