Like many forms of investment, structures and derivatives suffered a loss of confidence following the global financial crisis. This pessimism has been exacerbated by negative media coverage.
However, in the right hands, structured investments and derivatives can help clients optimise their portfolios in a number of ways. Here are three benefits you could experience when investing in structures.
One of the key features of structured products is that they typically offer some form of capital protection. Depending on your preferences, structured investments are available that completely minimise risk exposure.
For clients who want greater returns, however, there are products that put more of your capital at risk. Either way, structures can be tailored to ensure your risk-return ratio is ideal for your portfolio requirements.
While capital protection features may sacrifice some upside potential, structured investments perform well in a number of market conditions, including flat-to-negative growth.
Access to new markets
Investing in structures enables clients to explore a number of markets or underlying assets that they may not necessarily be able to access normally.
As such, you can participate in attractive overseas or emerging markets while avoiding risk due to the fact that structured investments have clearly predefined returns.
With a phenomenal amount of choice available among structures, you have significant flexibility to diversify your portfolio and pursue specific investment strategies.
Prepare for the future
Clients know the maximum potential risks of a structured note from the beginning, allowing them greater visibility across the lifetime of their investments. This can help with wealth management and tax planning, which can be an important factor for some investors.
For example, a primary objective of many family offices is to preserve wealth for future generations – making some traditional asset classes unappealing because of the associated risks. Structured investments, on the other hand, offer a stable and transparent way of growing wealth while reducing exposure.