Structured Products

Understand research reports about the least risk high yielding market linked investments.

What are Structured Products

Structured Products are designed to meet unique risk-return objectives. These objectives are achieved by taking conventional underlying assets and replacing their usual returns with non-traditional payoffs from other underlying assets.

Fundamentally, the returns from structured products are linked to traditional returns from underlying assets. However, they are combined with swaps, futures, and other derivative products to leverage higher participation in case of an upside or a downside. Structured Products offer the flexibility to the investors in choosing a customized payoff that typically is a combination of fixed and variable market linked return over the period of the investment suiting their own risk-return objectives with efficient tax planning.

Structured products in India are often linked to NIFTY performance and downside protected up to the capital deployed (however not necessarily always)

Typical structured products in India have the following components

1. A bond: The bond component ensures capital protection. At any point in time, if the underlying asset does not perform as anticipated, the investor gets the capital invested returned 100%.

2. One or more underlying equities: The underlying asset improves the return on the investment. The underlying would be a single instrument or a basket of instruments, which could be any asset class such as equity, debt, index, ETF, currency or interest rate.

3. A derivative of the underlying asset: The derivatives component helps determine the overall risk in the product. The commonly used derivatives are options on the underlying asset. The derivative determines that the instrument allows investors to achieve a targeted return on investment by customizing the underlying asset classes to meet set financial goals.

Features of Structured Products
These products are usually long-term in nature requiring a lock-in of at least 12 months and an investment horizon of 2-3 years to gain maximum returns.
A mix of conventional instruments
A structured product is always an amalgamation of multiple financial instruments integrated to achieve a pre-determined goal.
The risk of a structure product depends on several variables like the underlying to the strategy that is being implemented. However the objective of a structure product is to de risk the market volatility as much as possible.
Ticket Size
Structured products require a minimum investment of Rs 1 crore by an investor if invested directly. The ticket size will vary across issuers.
Structured products could be fully protected, partially principal protected, or without any principal protection investments.
Advantages of Structured Products

1. Highly Customizable: The product is designed to be customized uniquely for you.

2. Meet Varied Objectives: Structured products can be tailor-made to achieve your unique products. Be it growth, income, or a combination of both.

3. Monetize Market Views: You, as an investor, have the flexibility to customize a product that lets you benefit from your particular market views. Structured products are exceptional products to maximize from your ability to predict markets.

4. Choice of capital protection: You could also benefit from the capital protection clause by choosing such structured products.

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