Structured Product

An instrument that pairs a traditional security such as a bond with a derivative which gives a pay-off based on the performance of something else, such as the price of gold or a stock market index. They’ve proven popular as they give retail investors access to otherwise hard-to-reach asset classes such as interest rate spreads, currency or commodity derivatives. Structured products come in all shapes and sizes – some offer principal protection while others offer leverage, and they’re often extremely complicated. The return on the performance component can be capped or not realized all together if the underlying asset performs below expectations.. Being highly customized, structured products can be illiquid. As any returns on the performance component are not reaped till maturity, structured products are often considered buy-and-hold investments.