Structured products are hybrid instruments created to meet specific needs that cannot be met from the standardized financial instruments available in the markets. They are linked to market products; derivatives, single security, a basket of securities, options, indices, commodities, debt issuances and/or foreign currencies, and to a lesser extent, swaps.
Main Types of Structured Products :
A tracker replicates the performance of an underlying asset directly and with no leverage. Trackers give investors a cost efficient means to trade an asset (such as a currency or commodity) or to diversify their exposure across an index.
Tracks an underlying asset (commodity, Halifax house price index, equity indices etc)
Cost efficient means to trade an asset
Diversify exposure across an index
Typically long-dated or indeed undated with an indefinite lifespan
Reverse Trackers are very similar to standard trackers but have an inverse relationship with the underlying asset- should the price of the underlying asset fall, the price of the reverse tracker will rise. These products can also be referred to as bear certificates.
-An inverse relationship with the underlying asset
-Profit from downwards price movements in the underlying
Capital Protected products allow investors to gain some exposure to financial assets whilst protecting the capital invested, in return for surrendering any income related to the underlying asset.
-Exposure to underlying asset at fixed percentage
-Capital invested is protected at specified level
-Stamp duty free
Track underlying instrument without leveraged downside can incorporate many different features which affect payout (e.g. bonus if underlying remains with a specific range).