Structured Products

What are they? 

Structured products are investment tools designed for retail and institutional investors alike that have numerous potential benefits, including capital protection, risk/return profile optimisation and diversification. Structured products must contain at least two components, typically a bond and an option. Issuers can provide a range of common strategies including Autocalls, synthetic zeros, range accruals, reverse-convertibles and participation notes.   

 

Auto callable Notes 

What are they? 

These products reference an underlying and have “Observation dates” at defined intervals throughout the life of the note. The product would be called prior to maturity by the issuer if the reference asset is at or above its initial level (or any other predetermined level) on the specified observation date. The investor would receive the principal amount of their investment plus a pre-determined premium and the autocallable product is said to be redeemed early. Unlike a direct investment in the reference asset, the appreciation potential in autocallable notes is limited to the premium or coupon amount albeit with the advantage of capital protection to a certain level. 

Redemption Price at Maturity 

 On maturity, if the Notes have not redeemed early, the Redemption Price depends on the performance of the underlying: 

  • If on Final Valuation Date the official closing level of the Index is greater than or equal to 70% of its initial level, the notes will redeem at 142.20% of the Denomination 
  • If on Final Valuation Date the closing level of the Index is greater than or equal to 60% of its initial level, the notes will redeem at 100% of the Denomination 
  • If on Final Valuation Date the official closing level of the Index is lower than 60% of its initial level, the investment falls 1% for every 1% fall in the Index 

 

 

Source: Castlefield

 

Before making an investment decision, you should consider obtaining independent advice. The value of an investment can fall as well as rise and returns are not guaranteed. With investment your capital is at risk.

Download the pdf version here

TNRRSP/050320

 

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