What are Structured Products?

Structured products are financial instruments issued by institutions. They are designed to meet specific investment objectives. These include capital protection, yield optimisation and leverage. Structured products are linked to or based on the cash flows of one or more underlying assets that may include equity, debt, interest rates, commodities and indices.

They may typically be classified under the following categories:

• Equity-linked notes
• Foreign exchange and commodity-linked notes
• Interest rate-linked notes
• Multi asset-linked notes

TraX currently lists products in the following categories:

• Product Types Underlying
• Index Certificates Equity-linked notes
• Capital Guaranteed Notes Multi asset-linked notes
• Discount Certificates Equity-linked notes
• Reverse Convertibles Equity-linked notes

Index Certificates

Index certificates offer an investor exposure to a chosen market/index on a 1:1 performance basis. This implies that the return on investment from these instruments directly mirrors the up/down performance of the underlying market/index.

Capital Protected Notes

These instruments give a capital protection at maturity. The return (if any) is based on the performance of the underlyings along with a rate expressed by a predetermined participation rate.

Discount Certificates

A discount certificate offers an investor exposure to the relevant underlying, like a stock or an index, but at a discount compared with the spot price of the underlying. In order to obtain this discount, the investor is willing to give up part of the potential upside movement of the underlying, known as the cap.

Reverse Convertible

A reverse convertible offers an investor exposure to the relevant underlying, like stock or an index. It is essentially an income product where the return of capital depends on the underlying not falling below a certain level over the term of the product. Any falls below this level triggers an event that reduces the return on a 1:1 basis. The upside potential is mostly capped.

• Absorb  regional and local liquidity
• Boost regional and local growth in equity markets
• Need for global platforms with high level of transparency and credibility

Structured products offer many advantages to issuers:

• Raise profile amongst regional investors
• Diversify investor base
• Large liquidity pool

Structured products offer many advantages to investors:

• Access to a broad spectrum of investment products that suit investors’ appetite for risk or security.
• Easy exposure to all attractive asset classes with a single account
• Alternative investment opportunities for investors.
• Simple accessibility to regional trackers
• Potential for high returns with limited risk
• Unit cost often low (suitable for retail investors)
• Easy to trade – similar to share trading
• Transparent, well regulated market