Structured Products combine many of the features of traditional investments such as bonds with financial derivatives such as options. This combination allows for returns linked to the performance of underlying investments, such as individual securities, market indexes, currencies, and commodities. Structured products have a fixed maturity date and are designed to offer specific risk-return tradeoffs, with pre-set formulas for both the potential risk and potential return. Structured products offer investors the potential to earn returns tied to the performance of an index or basket of securities.
Structured products are subject to the risk of default by the issuer. Therefore, the financial condition and creditworthiness of the issuer are important considerations when assessing the ability of the issuer to meet its obligations according to the terms of the structured product.
Most investment portfolios are comprised of real property, stocks, bonds, and mutual funds – but there is an additional group of investments that may be suitable for certain investors, most commonly known as Structured Products. These products have recently experienced a surge in popularity among U.S. investors. Because of their ability to address a wide variety of investor objectives, Structured Products can help investors diversify their portfolio, manage risk, and take advantage of specific market views.