Growth-focused structured notes are custom-issued investment products that can provide investors with indirect exposure to underlying indices or assets.
The return of public equities, through indices, ETFs, single stocks, commodities, or currencies can be indirectly accessed via a structured solution, which may expand an investor’s opportunity set. These products can be approximately replicated through the combination of an underlying asset-linked derivative, with the equivalent of a zero-coupon bond. This combination can work to either provide principal repayment at maturity or offer continual downside protection through to maturity. These methods for downside protection are typically outlined in the terms of the product along with other specifications such as the participation rate, maximum payment, minimum payment, and time to maturity.
Structured solutions are not an asset class, rather they are an implementation tool for client portfolios that can be tailored to express a particular view on the markets or enhance a portfolio’s outcome. Structured solutions may provide similar characteristics to alternative asset-allocated portfolios while seeking to capitalize on public market assets such as equities.
An investor considering an investment in growth-focused structured notes should carefully consider any materials describing such a product, and its risks, including but not limited to the following specific risks:
market risk
credit risk
illiquidity risk
capped return
no direct ownership of the underlying assets
returns may underperform broader market
tax considerations
origination costs
no dividends or interest payments
If you would like to learn more about growth-focused structured notes, the deep dive of this article is available by logging into the CAIS Platform.
