Introduction
The traditional asset classes of bonds and equities (in the form of direct investments or via funds/ETFs) offer investors either fixed interest income or the potential for capital appreciation in the event of price increases (in addition to any dividends).
Structured securities – a sensible addition to many portfolios
For investors who do not want to rely solely on interest income and/or rising equity prices, structured securities offer the opportunity to preserve real value, defend against inflation, diversify portfolios and align them (more) defensively, optimise earnings potential, and cushion risks. Without structured securities, many of these strategies would be reserved exclusively for institutional investors.
Depending on the product category and specific product design, structured securities are predominantly positioned between the traditional asset classes of bonds and equities in terms of their risk/reward profile.
Features and advantages (depending on product design)
Structured securities ...
- are, from a legal perspective, debt securities of the issuer – with securities prospectuses, regulatory approval, and exchange listings.
- have clear payout profiles – investors know in advance what return can be achieved in which scenario.
- offer earnings potential, even in sideways or downwards trending markets.
- can be used to reduce the risk of equity exposures.
- allow the hedging of individual positions or entire portfolios.
- are liquid and tradable at any time under normal market conditions because of ongoing pricing by the issuer (market making).