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Structured Product

A structured product is defined as a financial product that implements a specific investment strategy with reference to a single security, a number of securities, stock market indexes, commodities, or even interest rates. For High Net-Worth Individuals (HNIs)... A structured product is defined as a financial product that implements a specific investment strategy with reference to a single security, a number of securities, stock market indexes, commodities, or even interest rates. For High Net-Worth Individuals (HNIs) and Ultra High Net-Worth Individuals (UHNIs), these products are meant for achieving certain investment goals like capital protection, and higher return, and to enable the investor to access market segments that may not be easily accessible. Structured products, as the name suggests, incorporate equities and fixed-income instruments together with derivatives in order to develop solutions. See More See More

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Key Features of Structured Products

Tailored Risk/Return Profiles

Tailored Risk/Return Profiles

Structured products are created to help meet particular financial objectives ranging from the HNI investors’ risk tolerance, time horizon, and market conditions.

Capital Protection

Capital Protection

Structured products vary concerning their risks and returns, and some indeed allow for capital protection, where the investor will receive back invested capital at maturity (as per the structure's terms and conditions).

Derivative Components

Derivative Components

Many times, structured products include options or other derivatives to make the returns either higher or to mitigate the risks involved.

Underlying Assets

Underlying Assets

Structured products normally or generally depend on the performance of any underlying asset including but not limited to: indices such as Nifty, equities, commodities, etc.

Flexible Investment Horizons

Flexible Investment Horizons

These investments can be for short-term or long-term, based on the requirements and strategies of the investors.

What are the Steps Involved in Creating a Structured Product?

Conceptualization

Conceptualization

The goals have to be defined, whether it will be of earnings or income targets, wealth preservation, or market access.

Designing the Structure

Designing the Structure

Choose the asset or assets being used, the options, futures, participation rate, cap, and floor.

Issuance

Issuance

The product is developed and commercially released, in many cases, through the use of debentures and or other securities that are marketable.

Monitoring & Adjustment

Monitoring & Adjustment

The return of the structured product is considered, and possible changes could be made to enhance the product performance.

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What Are the Different Types of Structured Products?

Principal-Protected Products (PP)

Principal-Protected Products (PP)

These provide a market price guarantee, which infers that at the end of its life, the investor gets back at least his/her investment regardless of the underlying commodity or product.
Non-Principal Protected Products (Non-PP)

Non-Principal Protected Products (Non-PP)

These products are not bank instruments because they do not provide a principal repayment, although they have the potential for higher yields.
Equity-Linked Notes (ELNs)

Equity-Linked Notes (ELNs)

These are related to the provision of an associated equity list or specific stock.
Index-Linked Notes

Index-Linked Notes

These are tied to indices such as the Nifty or Sensex and are framed to generate the amount of returns as the index.
Commodity-Linked Products

Commodity-Linked Products

Synchronized financial instruments that are associated with base metals price movement (for instance, oil, gold, etc.).
Credit-Linked Notes

Credit-Linked Notes

These are pegged on the credit standing of an individual firm or organization.

Investment Process for Structured Products

Consultation with Experts

Consultation with Experts

The buyers of structured products should especially seek advice and recommendations from their financial consultants about their objectives, their attitude to risks, and the appropriateness of the investment.

Selection of Product

Selection of Product

Select an asset in accordance with the principles that can be defined using the information given by the investor: capital protection, increased yield, and attractiveness of various markets.

Purchase

Purchase

The rationale involves financial institutions or a brokerage providing the structure to the market through creating the product.

Monitoring

Monitoring

Keeping track of the product’s performance is therefore crucial and most important for non-principal protected products that may significantly be impacted by market forces.

Maturity or Early Exit

Maturity or Early Exit

As it reaches its due date, the investor obtains the return according to the earnings of the invested asset(s). Sometimes structured products can be marketable before the maturity date, though this comes at a loss due to unfavorable market conditions.

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How Can Anand Rathi PCG Help with Structured Products Investments?

Tailored Solutions

Tailored Solutions

At Anand Rathi PCG, we have structured products that are even managed according to the preferences of one investor or the goals and objectives of one investment.

Expert Advice

Expert Advice

Our team specializes in the products we offer and has vast experience having worked in the structured products market; thus, we provide individual personal advice on choosing the right products and ways to minimize possible risks.

Comprehensive Research

Comprehensive Research

Professional analysis of the work of the underlying assets and the behavior of the market and each product’s structure are useful to our clients.

End-to-End Support

End-to-End Support

Whether it comes to product structuring, potential investment identification, or selling, right up to structured product portfolio monitoring post-investment, Anand Rathi can assist you.

FAQs on Structured Products

  • Customization: Structured financial products can be created to fit the unique needs of investors with regard to either financial goals or risk tolerance.
  • Capital Protection:Some of the structured products provide some measure of capital protection and therefore can be recommended for conservative investors.
  • Enhanced Yield Potential: It can provide superior levels of return to conventional forms of investment, particularly in depressed interest rate regimes.
  • Diversification: Structured products allow investors to invest in a range of assets, and therefore the products can be useful in portfolio diversification.
  • Access to Unconventional Assets: It also becomes possible for investors to invest in markets or strategies that could be hard for them to get into.
Some of the structured products are protected by the capital market in specific ways; for instance, principal-protected products. Nonetheless, in non-principal protected structured products, it is possible that the investment amount may not be repaid. Investors must always look at the fine print before they invest.
While most products are made to cater to specific investor requirements, other types of structured products are made with specific goals and bounds such as yield enhancement or capital protection. Structured products often use derivatives and are generally more tailor-made than typical shares or treasury bills.
The return on a structured product depends normally on the performance of an associated asset, such as an index or a stock. It can be a fixed coupon, a percentage of the asset’s performance, or sometimes it is flexible and depends on certain marks being met.
In general, structured products are appropriate for investors to understand their risk tolerance and financial objectives. They will not be applicable for every retail investor, hence they are mainly suited for conservative risk-taking and high liquidity seekers.
The maturity of structured products still remains relative, with product maturities ranging between one and five years. The duration should respond to the needs of the investor as well as the time that he or she is willing to invest.
Namely, market conditions have the potential to affect the performance of structured products, particularly non-principal protected ones. Dynamics such as fluctuations, rates of interest, and market returns play important parts in returns.
The factors that should be taken into consideration by investors regard tolerance to risks, investment objectives, the kind of asset in the structured product, and the structures governing the structured product. One also must consider the risks of the product such as loss of capital and availability of liquidity is also something that needs to be considered.
It is possible to sell selected structured products before maturity, but this is dependent on the market and upon the approval of the issuer. When selling early, it may prove to be a loss-making decision if the market rates are unsuitable.
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