We define a structured product as, ‘An investment backed by a significant counterparty (or counterparties) where the returns are defined by reference to a defined underlying measurement (such as the FTSE 100) and delivered at a defined date (or dates)’
A ‘capital-at-risk’ structured product might for example offer a return of 65% on the investment if the FTSE 100 is at the same level or higher on the day the product matures in 5 years’ time. If the FTSE 100 is below that level, it will return the invested capital, unless it is more than a specified amount below, say 50%, whereupon capital would be reduced by the equivalent fall in the FTSE 100.
Most structured products may be sold during the term but they are designed to be held until their maturity. If sold early, the investor may get back less than they invested, even if the underlying asset has performed well. These investments should therefore only be considered if the intention is to hold them for the full investment term
Structured products offer many attractive features which can be used to satisfy a variety of investor needs. However, we do not believe they should be seen as a replacement but as a complement to traditional investments such as funds.