Why structured products?
Structured products are investment instruments designed to offer tailored exposure to various assets or market conditions, making them attractive for a variety of investment strategies. Here are several reasons why investors might consider structured products:
Customisable Risk and Return Profiles: Structured products allow investors to create personalised investment profiles based on their financial goals, risk tolerance, and market outlook. This customisation can include varying levels of capital protection, payout structures, and underlying asset exposures.
Enhanced Yield Opportunities: Many structured products are designed to provide enhanced yields compared to traditional fixed-income investments. This is particularly appealing in low-interest-rate environments, where investors seek higher returns without taking on excessive risk.
Market Participation with Safety Nets: Certain structured products offer downside protection, enabling investors to participate in market gains while limiting potential losses. This characteristic is beneficial for those seeking growth without fully exposing their capital to market volatility.
Diversification: Structured products can provide exposure to a wide range of underlying assets, including equities, commodities, currencies, and interest rates. This diversification can help mitigate risks and improve overall portfolio performance.
Access to Complex Strategies: They enable investors to access sophisticated investment strategies that might not be easily achievable through direct investments. For instance, structured products can incorporate options strategies that provide leverage or conditional payoffs, which require a deeper understanding of the market.
Tax Efficiency: Depending on the structure and local regulations, some structured products may offer tax advantages. For example, certain payoffs may be treated favourably under capital gains laws, potentially optimising the overall tax burden of the investor.
Market Conditions Adaptability: Structured products can be designed to perform in specific market conditions, including rising, falling, or sideways markets. This flexibility allows investors to tailor their investments to current economic forecasts and personal views on market direction.
In summary, structured products represent a versatile tool within the investment landscape. They enable investors to align their investments with personal objectives, market conditions, and risk preferences, making them a compelling option for many.