Structured Products

Structured Products

Do you understand what structured products are, what examples exist, what opportunities and risks they offer, and who they are suitable for?

Structured products are modern financial instruments that are created by combining a classic investment product (e.g. shares, bonds or currencies) with an additional, usually derivative component (such as options or swaps). This link allows the products and their payout profile to be adapted to specific market expectations and risk profiles. In this way, they enable targeted investment strategies and often offer access to markets or strategies that would otherwise be difficult for private investors to achieve. Their repayment and potential profit are directly linked to the performance of one or more underlying assets, such as a share or index.

Popular Product Structures

There are countless varieties of structures, underlyings, strike prices and maturities, with the following product types attracting the most investment funds or trades:

  • Tracker certificates: They participate directly in the performance of an underlying asset, such as an index, and are often available in different variants (for example, capital protection, bonus or discount certificates).
  • Warrants: With these, investors can bet on falling or rising prices of an underlying asset and benefit disproportionately (= leverage effect) from its development.
  • Other popular product types include reverse convertibles, mini-futures or capital protection products, which offer different opportunity and risk profiles.

Further product knowledge can be found on the following page: SIX Structured Products

Opportunities and Risks

Structured products offer investors various opportunities: They enable the targeted implementation of individual market expectations and can be used in the event of rising, falling or sideways markets. Some products offer capital protection or discounted entry opportunities — others allow a disproportionate participation in price gains if the market develops as expected.

But the opportunities also include special risks:

  • The product can become worthless if the underlying asset develops strongly negatively.
  • In the event of the issuer's insolvency, there is a risk of total failure (issuer risk).
  • The products are often complex and not intuitively understandable — careful comparison and good information are important.
  • Not every product is suitable for every market situation or every investor.

Who Are Structured Products Suitable For?

Structured products are particularly suitable for investors who have a specific expectation of the development of a particular market or underlying asset and want to implement their investment strategy flexibly. They offer more creative freedom than classic investments, but are often complex and require a good basic understanding of how they work, the individual risks and the market. For experienced investors, they can be a useful addition to the portfolio. If you have little experience, you should get good information or advice beforehand and understand the value drivers and risks of the respective product structure before investing.