With interest rate rises on the horizon and ongoing market uncertainty investors face an uphill battle to find investment opportunities that can provide income or growth. However, structured products can offer better returns than investing directly in the market.
These are investments backed by a counterparty where the returns are defined by reference to an underlying measurement, such as the FTSE 100, and delivered at a defined date. They aim to provide some protection against market downside and achieve a defined outcome. Some products are growth orientated and some focus on income, and they typically have a maximum investment term of five or six years. So structured products can be used as a lower-risk way to get exposure to the market, without the volatility of funds or equities.
As with all investments, however, they involve downside risk. A structured capital-at-risk product, for example, might offer you 65 per cent on the investment if the FTSE 100 is at the same level or higher on the day the product matures in five years' time. If the FTSE 100 is below that level, it will return the investment capital - unless it is more than a specified amount below, say 50 per cent, in which case capital will be reduced by the equivalent fall in the FTSE 100.