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Structured Notes

A Structured Note is an investment tool which offers full or partial capital protection dependant on the structure of the note. The return paid is linked to the value or level of some specified asset or index.

Key Features of structured products:

  1. Capital protection – they usually undertake to repay the capital invested or some part of it at the maturity date though this might depend on certain conditions being met e.g. an Index not having fallen by more than 50% during the term. This said, some give no capital protection.
  2. Return linked to the value of an asset or level of an Index – For example they might give a return equal to the percentage growth if any in an Index between the start and end of the term.
  3. Fixed term – Both any capital payment and return are payable at the end of the term on maturity.
  4. Secondary market – there is often the facility to sell these on the secondary market before maturity but the market value received may be less than the amount invested.
  5. Often, this is not the same as investing in an asset or in the investments included within an Index directly. The investment assets might yield an income e.g. dividends but these are not usually reflected directly in the level of an Index or value of a linked asset.

What types of assets are Structured Notes linked to?

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