Structured Products

A Structured Product (or a Note) is a bond issued by a bank, whose performance is derived from the performance of some underlying asset (stock / stock index / currency / commodity), or from several underlying assets. The meaning of a bond is that the bank issuing the structured product commits in advance to the repayment terms, as determined in the product’s prospectus. Similar to a standard bond, this commitment is valid assuming that the issuer does not become insolvent. Therefore, the quality of the issuing bank and its financial strength are central parameters in making a decision to invest in a structured product.

Why Invest in Structured Products?

The main advantage of structured products is in the fact that, subject to the issuer not becoming insolvent, they can provide a relatively high level of certainty about the yield to be received and/or the risk involved in the investment, as the product’s terms are set in advance. Another advantage is the ability to define clearly and precisely the return/risk profile and tailor it to the investor’s needs. Therefore, structured products may provide a better return/risk ratio compared to traditional investments in bonds and stocks, especially in periods of high uncertainty and low returns.