Structured Products

What are structured products? 


Structured products are an investment category that combines two types of investment – a bond plus some other strategy with upside potential that is often structured as a call option.


The bond is a vanilla investment product that is designed to provide an element of capital protection, which is only ensured if the product is held to maturity. It is backed by the credit rating of the issuer, usually a sovereign or corporate entity. Credit ratings are independently verified and determine the likelihood of the bond maturing without defaulting and therefore give an indication of how secure the capital protection is likely to be. The level of capital protection is variable and will impact the remaining amount that is invested into the product that delivers the potential upside.


This is linked to the performance of some underlying that can be anything ranging from a single name equity. index, strategy or some combination of potential investment products. Often it is structured as a call option whereby the owner has a right to collect the upside, if it exists, and only bears the cost of the option as a downside.


We have structured products that give access to a number of niche or less widely available strategies. These sophisticated systematic products are often only available to institutional levels of capital and require significant amounts of research and knowledge in order to implement correctly. By structuring investments in this manner, we can provide investors access to such products limiting the downside risk. We therefore aim to provide diversification benefits to their portfolios, with a return stream that is typically uncorrelated to more traditional assets.

Key risks

Any investor should be aware of the drawbacks and potential risks of investing into structured products, and should take the time to assess whether the underlying is appropriate for them. Although not an exhaustive list, two important ‘risks’ to be aware of are liquidity and credit risk.

Liquidity risk

Capital protection can only be ensured if the product is held to maturity. Therefore, should investors redeem early they may not be guaranteed the full return of their capital protected investment.

Credit risk

The capital protection of the bond is dependent upon the credit risk of the underlying issuer. If the bond defaults. the level of capital protection may not be as expected and some or all of the original investment may be lost.