Structured notes: The best investment you’ve never heard of

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This product is a powerful tool that can accomplish almost any investment goal.

The advancement of technology in financial services has been a broadly positive development in recent years. For companies, technology and innovation have helped to streamline operations. Consumers, on the other hand, have benefitted through a combination of a greater variety of investment options, convenience, and improved access to financial services.

The first structured products were transacted in the UK in the early 1990s before spreading throughout Europe, most notably in France and Germany. Although the European structured product market is the oldest globally, it has since been eclipsed by the Asia-Pacific market. In fact, the total sales of structured notes in Hong Kong alone exceeds the aggregate volume for the whole of Europe. In only 30 years, the global market for structured notes has grown to over $3 trillion.

Maturity refers to the term of the structured note, which is generally around three to five years, though there are notes with terms up to 20 years. The underlying asset is the asset to which the note’s return is linked, such as an equity index. The capital protection of a note indicates the level of downside protection offered; generally, this is expressed as a percentage of the investor’s capital. The capital protection offered by structured notes is their primary draw to investors.

 

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