Structured notes represent the next big leap in portfolio personalization. As the Swiss Army Knife of investments, notes are a modern spin on the traditional risk-reward equation common to stocks but delivered in a structure closer to a bond.
1. Potential for equity-like returns, but with the possibility of lower volatility and reduced drawdowns.
2. Risk mitigation beyond conventional diversification can help strengthen a portfolio’s risk-adjusted potential.
3. Potential for enhanced yield or improved upside capture relative to similar assets.
Investors should be aware that structured notes carry inherent risks, including potential losses of principal, market volatility, and dependency on the financial institution’s creditworthiness, and should carefully consider these factors before making any investment decisions.
The Case for Structured Notes
Because structured notes can be tailored with a variety of different attributes, advisors and their clients can use them to achieve greater diversification, to gain or hedge exposure to certain asset classes, or to align portfolios with a particular market or economic view.
Generally, structured notes can help investors achieve three primary objectives: earn investment returns with less or no principal at risk, earn higher returns with or without some principal protection, and generate higher yields through the use of derivatives in client portfolios.