Defining Structured Products
Structured products are financial instruments that enable investors to pursue a specific objective or express a market view. They combine a debt security, such as a bond or a certificate of deposit, with one or more derivative instruments linked to an underlying asset class or reference asset, such as equities, commodities, currencies, or interest rates. Structured products are primarily used to reduce risk or increase income or returns in a portfolio.
The Primary Categories for Structured Products
Protection
Gives investors the opportunity to participate in the performance of the reference asset while protecting invested capital from a market decline.
Yield Enhancement
Allows investors to benefit from rangebound markets by combining conditional downside protection with partial upside participation via a fixed coupon that typically yields more than current interest rates.
Participation
Provides access to the returns of a sector, asset class, or investment strategy that may be difficult to gain exposure to, or that is deemed too volatile to include in the portfolio as a direct investment.
Leveraged Participation
Amplifies an investor’s participation in the potential price appreciation of a reference asset without incurring the potential downside impact of leverage.
Hypothetical Structured Product Trade
An investor who has a financial obligation in the near to intermediate term could invest in a market-linked note with equity exposure that returns 100% of the principal at maturity, plus the potential to participate in additional equity upside over the term of the note.
BENEFITS
Improve the risk-return profile of a portfolio.
Express a view on an underlying asset without being fully exposed to its price fluctuation.
Reduce risk by incorporating varying degrees of downside protection for a specified period.
Provide exposure to the returns of a sector, asset class, or strategy that may be difficult for investors to achieve on their own.
KEY RISK CONSIDERATIONS
Key risk considerations may include, but are not limited to, the following:
Loss of principal: Most structured products carry the risk of loss of principal. Only market-linked notes and deposits guarantee payment of principal at maturity, subject to issuer credit risk.
Maturity risk: The value of the reference assets can change before maturity.
Liquidity risk: Typically, there is a limited secondary market for structured products, and the issuer is not obligated to repurchase the position.
Please contact your financial professional or wealth management platform to learn more.
IMPORTANT INFORMATION
This material is provided for informational purposes only and is not intended as, and may not be relied on in any manner as legal, tax or investment advice, a recommendation, or as an offer to sell, a solicitation of an offer to purchase or a recommendation of any interest in any fund or security offered by Institutional Capital Network, Inc., or its affiliates (together “iCapital”).
Past performance is not indicative of future results. Alternative investments are complex, speculative investment vehicles and are not suitable for all investors. An investment in an alternative investment entails a high degree of risk and no assurance can be given that any alternative investment fund’s investment objectives will be achieved or that investors will receive a return of their capital. The information contained herein is subject to change and is also incomplete. This industry information and its importance is an opinion only and should not be relied upon as the only important information available. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed, and iCapital assumes no liability for the information provided.
Products offered by iCapital are typically private placements that are sold only to qualified clients of iCapital through transactions that are exempt from registration under the Securities Act of 1933 pursuant to Rule 506(b) of Regulation D promulgated thereunder (“Private Placements”). An investment in any product issued pursuant to a Private Placement, such as the funds described, entails a high degree of risk and no assurance can be given that any alternative investment fund’s investment objectives will be achieved or that investors will receive a return of their capital. Further, such investments are not subject to the same levels of regulatory scrutiny as publicly listed investments, and as a result, investors may have access to significantly less information than they can access with respect to publicly listed investments. Prospective investors should also note that investments in the products described involve long lockups and do not provide investors with liquidity.
Securities may be offered through iCapital Securities, LLC, or Axio Financial LLC, each of which is a registered broker dealer, member of FINRA and SIPC and subsidiary of Institutional Capital Network, Inc. (d/b/a iCapital Network). These registrations and memberships in no way imply that the SEC, FINRA or SIPC have endorsed the entities, products or services discussed herein. iCapital and iCapital Network are registered trademarks of Institutional Capital Network, Inc. Additional information is available upon request.
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