What Are Structured Notes?
Structured Notes are debt securities issued by banks and are ultimately designed to protect investor's principal, enhance returns or provide income. They provide a return based on the performance of an underlying asset—most often a stock index, exchange traded fund (ETF), or single stock. For this reason they are sometimes referred to as 'market linked bonds.'
The advantage of these investments is that an investor can pre-define both the payoff (how the investment pays) and the level of capital at risk (how much you can lose). In doing so, investors create a level of certainty over the life of the investment. Payoff profiles can be designed to take advantage of rising, falling or range-bound markets, and delivered in a way that can be tailored to the needs of investors.
Structured notes offer an innovative financial solution, cleverly bridging the performance potential of market investments with the stability often associated with traditional bonds. They provide a unique blend of features designed to enhance income and protect principal in varying market conditions.
ADVANTAGES OF STRUCTURED NOTES
Designed to deliver
income, protection,
and clarity in a
single investment.
Higher Income Potential
Generate higher annual income (8-15%) compared to 2-5% from traditional bonds, significantly boosting your returns.
Principal Protection
Many structured notes are designed to return 100% of your investment at maturity, safeguarding your capital.
Market Participation
Benefit from upside market participation that increase when markets perform well, capturing upside potential.
Defined Outcomes
Gain clarity by knowing your potential returns and risks upfront, allowing for precise financial planning.
Professional Management
Access institutional-grade investments previously unavailable to individual investors, managed by experts.
Income Flexibility
Choose payment schedules that suit your needs: monthly, quarterly, or annual distribution options are available.
WORKING
How do they work?
Structured notes represent the evolution of income investing, providing a sophisticated approach to navigating today's complex financial landscape with greater control and confidence.
How It Works
A structured note is basically a zero coupon bond tied to a derivatives package. These derivatives are usually in the form of call and put options that can hedge against market volatility.
The majority of a the investors principal is invested in a the zero coupon bond issued by the bank. When the bond matures, principal plus interest is returned to the investor. Meanwhile, the remaining amount invested in the derivatives package provides the enhanced returns and protection.
RISKS
Structured notes are not suitable for all investors. Read all prospectuses and pricing supplements carefully.
Call Risk
Issuer may redeem early; reinvestment terms may be less favorable.
Issuer credit risk
Notes are unsecured obligations of the issuer; default risk applies.
Fees and costs
May include advisor fees, structuring/development costs, and offering expenses.
Dividend risk
Notes typically reference price return; dividends on underliers are not received.
Liquidity risk
Secondary markets may be limited; issuers are not obligated to make markets.
Potential loss of principal
Principal protection depends on barriers; losses can be significant below barrier levels.
Market risk
Rates, inflation, and volatility impact underliers; past performance is not indicative of future results.
Tax treatment
Varies by offering; consult accounting, legal, and tax professionals.
