What are structured products?
Structured products are modern investment instruments distinguished by a high degree of flexibility and innovation. Structured products represent an attractive alternative to conventional, direct financial investments (such as securities, currencies and precious metals). The particular advantage of structured products concerns the individual adaptability for any investor’s risk profile and the ability to find a suitable investment solution even in challenging market conditions.
Structured products provide the investor with easier access to markets which, due to their nature, tend to be reserved to institutional investors.
From a legal standpoint, structured products are typically bearer bonds. The issuer of these securities is liable with all its assets for their fulfilment. In this respect, the creditworthiness of the issuer constitutes a quality characteristic for a structured product.
Importance of structured products
Over recent years, structured products have become established in Switzerland as an investment instrument. Today, Switzerland can be seen as the leading country in the area of structured products. There are meanwhile more than 20 different types of structured products, with varying characteristics. The innovative capacity of Switzerland as a financial centre enjoys high recognition internationally and is greatly appreciated by institutional as well as private investors alike. This contributes substantially to the respect and attractiveness of the Swiss financial centre.
However, structured products are also hugely important to the economy. Structured products allow equity and borrowed capital to be made available to companies on the Swiss capital market. According to the Swiss National Bank, currently around CHF 190 billion are managed in structured products – accounting for approximately 5 percent of financial assets managed in Switzerland. The labour market is likewise stimulated by this product class. At present, over 3,000 highly qualified professionals earn their income directly or indirectly in the area of structured products.
Advantages of structured products
Structured products offer a wide range of options. Based on the investor’s individual risk profile, tailored portfolios can be constructed that ensure a suitable pay-out profile for the investor in any market scenario. Structured products make it possible to profit from growing, declining or sideways-moving markets and generate attractive returns.
Risk management with structured products is likewise highly varied. From solutions with capital protection for risk-averse investors to leveraged variants for investors with a risk appetite – a broad spectrum of hedging possibilities is available.
The investor’s individual risk profile serves as the basis for risk management. Extensive consultation with the issuer as well as a clear and realistic self-assessment by the investor are therefore highly important.
