A structured investment is an investment product that is structured differently from any other type of investment. You would think from the name that it was a single, definite package of investment, but this is not so. Structured investment can be made up from any number of investment types. For instance it can be derived from a single security or a whole basket of them; it can include commodities, indices, options, foreign currencies or debt issuance. Some structured investments have a feature of principal guarantee if kept till it matures in however many years that takes. If this is the case, then the investment company simply buys a product that is sure to return the investor’s principal on maturity, then uses the rest of the money to purchase other assets.

If this seems a rather poor return, remember that you accept low returns for low risk and if your principal is guaranteed, then you must expect low returns. Structured products can be an alternative to other forms of investment and do actually utilize current market trends while minimising risk. Banks or their affiliates most often issue structured investment. They have a specific time frame for maturity and they contain two elements, viz, a derivative and a note. This means the investor gets paid interest at a set rate at certain times throughout the lifetime of the investment, and another payment at maturity.

Structured products are offered with the potential to give maximum returns, which is why investors are in many cases willing to accept the lower interest rates. The value of this trade-off is somewhat debatable; however, some companies have added more features to the original structured investment. This sweetens the pill a little more and interest is reviving. However, banks have also used these features to hide the amount of profit they are getting from investors - or if not hide, then to make it more difficult for the investor to find out. So what are the actual benefits to the investors? There is the protection of their principal, of course - that’s of major interest. Then there are those enhanced returns and reduced risks. Last but not least, there is tax-efficient access to an investment that is fully taxable.