Structured Certificates
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Structured Certificates
A certificate accords a right that is either based on several underlyings or has a value derived from several indicators. This allows you, even for a low capital investment, to achieve diversification over a broad range of investment opportunities or risk factors and by this reduce the level of risk.
Structured products are investment products available to the public whose repayment value derives from the development of one or several underlying assets. Underlying assets are investments such as shares, interest, foreign currency or raw materials such as gold, crude oil, copper or sugar. Structured products are a combination of a traditional investment (e.g. bond) and a derivative financial instrument.
A suitable product can be created for virtually every derivative strategy, market expectation (growing, sideways-moving, sinking) and risk profile (conservative, balanced, aggressive).
Most widely used are products with full or partial capital protection or optimum risk-yield ratios. More information on the workings of structured products is available under Product Know-How.
The investment category of structured products is of great importance to the Swiss Financial Center and the country's asset management industry. The category has seen considerable growth in recent years and has made a significant economic impact. SSPA publishes current market figures in its market reports.
Legally, structured products are obligations for whose fulfilment the issuer is liable with all of its assets. Unlike an investment fund of special assets specially protected by law, structured products are not subject to the CISA Collective Investment Schemes Act. which makes the credit rating of the debtor (issuer) of a structured product of considerable importance to the investor.
Through our Product providers we are able to tailor individual own certificates based upon your own risk reward profile. Index certificates reflect a entire market, being based on official indices (S&P, SMI) and Region certificates which are derived from a series of indices or companies of a certain region (eg. North America, Pacific Rim).
- Basket certificates. These are derived from a selection of national or international companies active in a certain sector.
- Commodity certificates. These are derived from a selection of the international commodity markets. CRB index, Currencies, Interest rates, Metals, Energy and Grain markets.
- Basket certificates where the principal is protected. Selecting this structure the Investor gets an annual coupon linked to the performance of an equity basket (or other underlying). The annual coupon is 100% of the basket performance with the automatic feature that resets the performance of the best-performing shares at a fixed price. This means that the upward potential is limited, but therefore the coupon payment will never go below 0% at 100% redemption on the end of the term.
Categorization
The categorization model consists of four main categories. Each category contains a varying number of product types, demonstrating how a product functions by using a payoff diagram. The descriptions provide information on the investor's market expectations as well as product-specific characteristics.
Leverage products allow investors to participate to a disproportionately high degree in the performance of the underlying while themselves putting little money down. The leverage effect means that the risk attached to these products is correspondingly higher than that of a direct investment. Leverage products are thus suitable only for investors with a high risk profile.
2.) Yield-enhancement Products
Yield-enhancement products offer investors the chance of a higher yield than they would earn on a direct investment in the underlying when markets are moving slightly higher/lower or trending sideways. Examples here include common instruments such as discount certificates, reverse convertibles and barrier reverse convertibles.
Participation products generally combine a certain number of defined individual securities (a basket) or an index into a single security. Participation products often fluctuate in a 1:1 relationship to the underlying (delta =1). At maturity, the closing index value or closing price of the basket is paid out. As a rule, participation products offer an opportunity to achieve broad risk diversification even with smaller investment amounts, while also keeping administrative costs low.
4.) Capital Protection Products
A capital protection product guarantees the investor a certain minimum repayment (usually 100%) of the invested amount at the end of its term. It should be noted, however, that the price calculated during the term of the derivative may be below the capital protection level. Depending on how they are structured, the upside potential offered by capital protection products may be either capped or unlimited.Investment in Index, region or commodity basket basically involve the same level of potential loss as a direct investment in the corresponding equity it selves. In contrast to a direct investment in equities or other underlying certificates do not confer any voting rights or entitle the holder to a dividend payment. Certificates also carry an issuer risk. Important is to consider that these Taylor made products are issued by recognized financial institutions or banks
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