Given today’s increasingly volatile investment markets, structured products have emerged as a powerful tool, offering a unique combination of capital protection and potential for significant market-linked gains.
Once known as the domain of institutional investors, these sophisticated financial instruments have undergone significant transformation, evolving from complex, high-cost investments with prohibitive minimums to more accessible and transparent offerings. The improved access of these products to individual investors has been driven by a combination of technological advancements and growing demand for tailored investment solutions that cater to specific investor needs and risk profiles.
Samukelo Zwane, Head of Product at FNB Wealth and Investments says, “the benefits of structured products are numerous and compelling. Firstly, they offer customisation and flexibility, allowing investors to tailor their risk-return profiles to align with specific investment objectives and market outlooks.”
“Many structured products provide a level of capital protection, safeguarding the initial investment against market downturns, which is a particularly appealing feature in unpredictable economic conditions,” adds Zwane.
What’s more, these innovative products often offer the potential for enhanced returns compared to traditional investments, and the fact that they are often linked to global indices or various asset classes makes them an excellent risk-appropriate way of achieving asset and geographic diversification in a portfolio.
The recent launch of FNB’s third tranche of structured products is a prime example of the way in which these useful investment solutions have become more accessible than ever to retail investors. With minimum investments of R20 000 for the rand-denominated product and US$6 000 for the dollar-denominated offering, FNB has significantly lowered the barrier to entry to structured products for individual investors.
“These two FNB products also exemplify the opportunity that structured products provide for investors to access geared growth potential linked to global investment opportunities. The FNB 100 CapitalPreserver Participation 3 (ZAR) allows investors to participate in the growth of the EuroStoxx50 Index with a 200% participation rate. This means that if the index grows over the five-year term, investors will enjoy a return of double that of the index’s performance. With 100% capital protection at maturity, this product ensures that investors’ initial investments are safeguarded, making it an attractive option for those looking to benefit from European market growth without the associated risk,” says Zwane.
“Designed for investors seeking exposure to the proven resilience of the Bloomberg Luxury Series 1 Index, the FNB CapitalPreserver Autocall 3 (USD) is a US dollar-denominated investment that offers potential returns of 11% to 12% per annum if the index remains flat or rises at pre-specified observation dates. The product includes a 30% drawdown buffer, ensuring that as long as the index doesn’t drop by more than 30%, investors will still receive their full capital back at maturity,” adds Zwane.
Both FNB products provide individual investors with access to global markets and indices, a key advantage in today’s interconnected financial landscape. The EuroStoxx50 Index offers exposure to 50 of the largest and most liquid stocks in the Eurozone, while the Bloomberg Luxury Series 1 Index tracks the performance of companies in the global luxury goods sector. These indices not only provide geographical diversification but also exposure to specific sectors and themes that may outperform in certain market conditions. The structured nature of the products allows investors to benefit from this exposure while managing downside risk through capital protection features.
“While structured products can offer significant benefits, it’s important for investors to thoroughly understand the terms, risks and potential returns of any product before investing. As with any investment decision, consulting with a financial advisor to determine how structured products might fit into an overall investment strategy is recommended,” concludes Zwane.
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