Understanding structured products
Structured products are investment products with a series of derivative 
components that offer the potential to achieve better returns. They can be designed and customised to link the payoff to an underlying asset, such as equities, indices, mutual funds, interest rates and currencies.
Unlike traditional investments that typically focus on the bullish performance of an underlying asset, structured products can be customised to an investor’s investment objectives, risk appetite and market views.
Features
Customisability
Structured products can be customised to an investor’s specific investment objectives, time horizon, risk profile and market views.
Accessibility
Structured products can be linked to a broad range of markets and asset classes.
Portfolio enhancement
Investors can express their specific market views through structured products and diversify their portfolios.
Types of structured products
Structured products can be classified into the following broad categories:
Minimum Redemption Notes
- These guarantee investors a rate of return that is at least the principal amount invested, as long as the product is held to maturity, unless the issuer defaults.
- Lower risk and lower return.
- For investors with defensive profiles.
Yield Enhancement Notes
- These allow investors to earn a yield that is typically in excess of traditional money market products if the underlying does not fall below a predetermined level.
- For investors with moderate to aggressive risk profiles.
Participation Notes
- These allow investors to participate in a specified amount of upside of the underlying asset.
- For investors with moderate to aggressive risk profiles.
Tactical Notes
- These include all other non-standard structured products and work best in specific market conditions.
- For investors with moderate to aggressive risk profiles.
Types of structured products
Structured products can be classified into the following broad categories:
Minimum Redemption Notes
- These guarantee investors a rate of return that is at least the principal amount invested, as long as the product is held to maturity, unless the issuer defaults.
- Lower risk and lower return.
- For investors with defensive profiles.
Yield Enhancement Notes
- These allow investors to earn a yield that is typically in excess of traditional money market products if the underlying does not fall below a predetermined level.
- For investors with moderate to aggressive risk profiles.
Participation Notes
- These allow investors to participate in a specified amount of upside of the underlying asset.
- For investors with moderate to aggressive risk profiles.
Tactical Notes
- These include all other non-standard structured products and work best in specific market conditions.
- For investors with moderate to aggressive risk profiles.
Risks
What you need to know
Credit risks
- What happens when the issuer of my structured product defaults?
The repayment of the structured product will be subjected to its level of seniority in the issuer’s capital structure. Hence, you may lose part or all of your initial investment if the issuer defaults.
Market risks
- My structured product references an underlying equity. Will its performance be influenced by any factors other than the underlying equity’s performance?
Before maturity, the structured product’s value will not only be influenced by the level of the underlying instrument, but also other factors such as interest rates, volatility, currency fluctuations and time to maturity.
Performance risk
- What’s the worst-case scenario for my investment?
Structured products are subject to capital risk. You may lose all of your initial investment if one or all the underlying instruments underperform.
Liquidity risk
- I have purchased a structured product, but need to sell it off before its maturity. What can I do?
The structured product issuer typically provides a daily off-exchange secondary market under normal market conditions. The amount you get back will be subjected to the Product’s open market price, which may be less than your initial investment amount.
Things you should know
Important notice and disclaimers
The above is provided for general information only and does not have any regard to the specific investment objective, financial situation and particular needs of any specific person who may read or receive this publication. This publication should not be regarded as an offer, recommendation, solicitation or advice to buy or sell any investment product and shall not be transmitted, disclosed, copied or relied upon by any person for whatever purpose. Any description of investment products is qualified in its entirety by the terms and conditions of the investment product and if applicable, the prospectus or constituting document of the investment product. Nothing in this publication constitutes accounting, legal, regulatory, tax, financial or other advice. If in doubt, you should consult your own professional advisers about issues discussed herein.
The information contained in this publication, including any data, projections and underlying assumptions, are based on certain assumptions, management forecasts and analysis of known information and reflects prevailing conditions as of the date of this publication, all of which are subject to change at any time without notice. Although every reasonable care has been taken to ensure the accuracy and objectivity of the information contained in this publication, United Overseas Bank Limited (“UOB”) and its employees make no representation or warranty of any kind, express, implied or statutory, and shall not be responsible or liable for its completeness or accuracy. As such, UOB and its employees accepts no liability for any error, inaccuracy, omission or any consequence or any loss/damage howsoever suffered by any person, arising from any person acting or refraining from acting in reliance on any information, opinion, prediction or valuation contained herein.
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