ABOUT STRUCTURED PRODUCTS
Structured products have been around since the 80s but it was only in the late 90s that they began to be offered widely to the public, that is a relatively new form of savings.
Structured products are customized investment products where the investor is offered placements based on their own view of risk and return. For example, there are capital protected products that take part of the return in exchange for a capital guarantee, while other types of structured products offer the opportunity for higher returns by increasing their risk.
Structured products provide the opportunity to easily take advantage of the markets and investment opportunities that are otherwise difficult to reach. This also helps to spread the risk of the savings portfolio (diversification). Structured products are taking advantage of the various investment opportunities and development scenarios that constantly arise in various markets. This allows the investor continuously offered a variety of structured products where each location is unique.
There are a variety of structured products, based on risk they can be roughly divided into three types: capital protected products, market products and leveraged products. One can also divide them based on various underlying asset, ie which market the products offers exposure to. Asset classes for structured products are often divided into shares, currencies, commodities, interest rates, credit and hybrids.
Since the return of structured products is determined by predetermined structures (the return is rule-based, compared with management based mutual funds) the investor knows in advance the duration and conditions for the generation of returns. The same applies to charges, where the investor knows in advance what fees are due.
Fees are charged at a time when the position is closed. Then there are no additional fees during the term or at maturity (compared to funds where contributions are deducted annually and may vary). commissions can be charged upon the sale of the placement prior to the end of investment term.
In Sweden, the market for structured products has grown from being a niche product to a broad form of savings available to investors as an alternative and complement to more traditional forms of saving. The ability to adapt the product to specific risk / reward profile of the individual investor is one of the reasons for its increased popularity.
The actors who appear in the primary market for structured investment products are issuers, arrangers and distributors. A single operator can take on one or more of these roles.
The issuer is the actor that establishes the prospectus and which is therefore liable under the conditions of the structured product. The issuer is usually a bank, some banks may act as both issuer, arranger and distributor.
The arranger is the actor that on the issuer’s behalf constructs the structured product and / or promotional material design and information about the nature and risks. It is usually the arranger that provides a secondary market for the structured Product.
The distributor is the one who, on behalf of the organizer, sells and or markets the structured product. It is primarily to the distributor you turn to if you have questions about your listing.