STRUCTURED PRODUCTS

Structured Products are investments where the value is derived from a reference asset(s) or investment strategy. The return of the investment is tied to the performance of the underlying asset(s), which may include equities, indices, foreign currencies, fixed income, commodities, interest rates, or a combination of these reference assets.

Benefits of Structured Products

Market Access

Investors can gain exposure to alternative asset classes that might otherwise be difficult to access. As such, it widens investors’ ability to diversify the portfolio and pursue tailored made investment strategies that are suitable for their risk appetite.

Enhanced Risk-adjusted Returns

Unlike fixed income, the return of a Structured Product can be linked to the performance of multiple asset classes within a single investment which generates higher yields compared to the traditional bond market.

Customization

Structured Products can be customized to suit investors risk tolerance and preferred investment horizon as well as the conditions of the market. It allows investors to customize the exact tradeoff between risk and reward of an investment and can be used as a tool to provide efficient diversification for their portfolios.

Risks Associated with Structured Products

Liquidity Risk

Investors who invest in Structured Products should be prepared to hold the investments to maturity. As there will be little or no secondary market for some of the Structured Products, it may not be possible for investors to sell them prior to maturity. Additionally, should there be a secondary market, liquidity will be low and investors should expect to suffer significant loss if they were to sell them before maturity date.

Credit and Default Risk

These notes are subject to the credit risk of the issuer. If the issuer defaults, the investors may lose all or some of the investment. Therefore, investors should take into consideration the financial strength and credit worthiness of the issuers.

Derivative Risk

The value of Structured Product is derived from some reference asset(s) and investment strategies. Issuers may implement trading or hedging strategies using one or more instruments such as leverage, options, swaps or futures. The complexity of the structure may affect the market value of the Structured Product. Investors are also subject to the price risk of each of the underlying reference assets and trading/hedging strategies implemented by the issuers. Therefore, depending on the structures, some may not guarantee payouts as their returns are linked to the performance of the underlying reference asset(s), thus it is possible that the returns may be significantly lower at maturity.