Structured investments allow investors to tailor their exposure to an underlying asset or index. Often linked to stock indices, they are are a common way of investing in equities whilst having clear and defined potential returns.
Structured investments, such as autocalls, are legally considered in the same way as senior unsecured bonds but with equity-linked risk and return.
| 6 Year 4.5% Corporate Bond | FTSE Linked Structure Investment | ||
|---|---|---|---|
Issuer | A+ Issuer | Issuer | A+ Issuer |
Status | Senior unsecured | Status | Senior unsecured |
Term | 6 Years | Term | 6 Years |
Clearing | CREST | Clearing | CREST |
Issue Price | 100 | Issue Price | 100 |
Coupon | 4.50% | Coupon | 40% at maturity depending on the FTSE 100 |
All associated risks are explainable, and they exist elsewhere in the financial system.
| Autocalls | Synthetics | Income |
|---|---|---|
Flat Autocalls Defensive Autocalls Multi Index Autocalls Metis Autocalls Consolation Autocalls | Synthetic Zeros Digitals Range Trades Accruals | Reverse Convertibles Digital Income Notes Range Trades Accruals Inflation Plus Phoenix |
Sit alongside:Equity income funds and absolute return funds Can be thought of as part of a Defensive Equity or Alternatives Allocation | Sit alongside:ZDPs Can be thought of as part of a Defensive Equity or Alternatives Allocation | Sit alongside:Income funds Can be thought of as part of a Defensive Equity or Alternatives Allocation |
The holder of the investments will be exposed to the credit risk of the issuer. A decline in the issuers credit quality is likely to reduce the market value of the product and therefore the price an investor may receive for the product if they sell it in the market.
Capital repayment depends on the performance of the underlying; the future performance of which cannot be guaranteed.
The investments will not be traded on an organised exchange. The issuer will use reasonable efforts to quote prices in all market conditions.
The secondary market price of the investments will depend on many factors including, but not limited to, the value and volatility of the underlying index, interest rates, dividend rates, time remaining to maturity and the creditworthiness of the Issuer. Prior to maturity, the price may be less than the amount the holder would have received on maturity of the investment.
The tax treatment of structured products can be complex and tax rates and regulations may change during the term of this investment. Guidance is given here, but if in any doubt investors should seek their own professional tax advice.
Whilst an investor might be happy with the capital erosion prospects at maturity, the reference index/indices may fall throughout the life of the security and the security might fall by more than you would expect.
