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The Power of Structured Investments

February 5th, 2009 at 03:03 pm

For those people who are disappointed at the returns their investments are making, there are structured investments to consider. Structured investments are products that are assembled by a team of experts for those who specialize in High Net Wealth and SMSF investments. It is an individual approach to investment creating specialized services for each individual investor. Formerly offered only to top-notch financial planners, the service is now being offered to individual investors.

The components for each product are sourced from the top wholesale financial firms worldwide. The products designed are transparent with the fee structure being reasonable, thus they can easily fit into the client’s day-to-day business.

When you realise that an analysis of traditional managed funds returns has seen the median Australian equity fund under perform its benchmark for 11 out of 15 years, you will see the benefit of structured investments. Structured investments provide total return no matter what returns other managed funds are bringing in. This is because they use structuring techniques and derivatives that provide yield enhancement and capital protection.

Since the whole idea of investing is to gain money, it makes sense to use those types of investments that will give you the best return.

What is a Structured Investment?

July 1st, 2008 at 12:12 am

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.