Investing can feel like a daunting task, especially with unpredictable markets and an overwhelming number of options to choose from. Many South Africans want to grow their wealth but are also mindful of protecting what they have already built – the challenge is finding investments that offer both security and opportunity.
One such investment solution is structured products. “Structured products are designed to give investors peace of mind in uncertain markets. They are designed to provide a balance between risk and reward, offering exposure to financial markets while managing potential downsides – making them an ideal solution for South Africans who want to build their investment portfolio without taking unnecessary risks,”says Samukelo Zwane, Head of Product at FNB Wealth and Investments.
FNB Structured products are transparent, accessible and aligned with our clients financial goals adds Zwane, as he unpacks what are structured products, how they work and provides insights on how they can benefit South African investors.
The evolution of structured products
Structured products were once the domain of large institutions and high-net-worth individuals, often perceived as complex and inaccessible. However, as financial markets evolve, so have these investment tools. Today, structured products are designed with transparency and accessibility in mind, making them an attractive option for a broad range of investors.
What are structured products?
Structured products are investment vehicles that provide a balance between growth potential and risk protection. Instead of buying shares or other assets directly, investors can put their money into a structured product that is linked to the performance of a specific market index or basket of assets.
Unlike shares and stocks, where returns depend entirely on market performance, structured products provide investors a predefined outcome. This means that you know from the start what conditions need to be met for you to earn a pre-determined return and what level of protection is in place if markets don’t perform as expected.
One of the key benefits of structured products is that they can be tailored to different risk levels. Some offer full or partial capital protection, meaning that even if markets drop, investors still get some, or all, of their original investment back. Others focus on providing enhanced returns by allowing investors to benefit more from multiples of market gains.
How structured products fit into an investment portfolio
Structured products can serve different roles in an investment strategy, depending on your individual investment objectives. If you are looking for growth, you will benefit from structured products that offer enhanced return mechanisms. If you want growth, but also prioritise security, you may prefer a capital-protected structure.
Irrespective of the type of structured product you choose, these innovative investment vehicles are useful for:
- providing exposure to global markets without full stock market volatility;
- enhancing returns through leveraged participation in an index’s growth;
- diversifying a portfolio by adding non-traditional assets; and
- hedging against currency risks, particularly for South African investors looking for offshore exposure.
Risks and considerations
He cautions that, as with any investment, structured products carry certain risks and requirements. The most important of these to note are:
- Liquidity constraints: Many structured products require a fixed investment period, limiting access to funds before maturity.
- Credit risk: The return of capital and any potential gains depend on the financial strength of the issuer, so it is best to choose a trusted structured product provider.
- Market risk: While structured products include risk-mitigation features, extreme market conditions could still affect returns.
- Currency exposure: Products denominated in foreign currencies provide diversification but also expose investors to exchange rate fluctuations.
Understanding these factors is crucial when choosing a structured product, ensuring that it aligns with your personal investment goals and risk tolerance.
Zwane says, “in a world where market volatility and global uncertainty persist, we recognise the need for structured investment solutions that offer both capital protection and growth potential. Designed for investors looking to diversify offshore without taking unnecessary risk.
FNB’s structured product range have gained momentum since launched in 2023, it includes both 100% capital guaranteed and partially protected options – available in ZAR and USD. With the recenclty launched tranche 5, the FNB 100 Capital Preserver Autocall and FNB Capital Preserver Autocall offer investors options to chose from based on the risk appetite.
“The structured products provide exposure to leading global indices while managing downside risk through capital guarantees. All solutions offer the potential for early payouts based on the performance of the underlying index,” concludes Zwane.
100% Capital Guaranteed Solutions
Best suited for risk-averse investors seeking capital preservation with steady returns.
- The FNB 100 Capital Preserver Autocall (ZAR) – Tranche 5 Gain access to the Solactive Top 50 China 5% Decrement Index with 100% capital protection in rands. If the index remains flat or rises at annual review dates, the product matures early and deliver a return of 11–12% p.a.. If not, it continues for 5 years, paying back 100% of the capital invested.
- The FNB 100 Capital Preserver Autocall (USD) – Tranche 5 Provides USD exposure to the Solactive Gold Miners 20 NTR Index.. Early maturity may occur from year 1 with a return of 5–6% p.a. if the index is flat or positive at any of the observation dates. If not, it continues to maturity, ensuring 100% capital repayment in USD.
Partial Capital Guaranteed Solutions
Tailored for moderate-risk investors who can tolerate controlled downside in exchange for higher growth potential.
- The FNB Capital Preserver Autocall (ZAR) – Tranche 5 Offers enhanced upside (17–18% p.a.) with exposure to the same China index as above (Solactive Top 50 China 5% Decrement Index). Capital is 100% protected if the index falls by 30% or less. If it falls by more than 30%, capital is reduced in line with the decline in the index.
- The FNB Capital Preserver Autocall (USD) – Tranche 5 For investors comfortable with USD exposure and market risk, this product targets a 19–20% p.a. return linked to the Gold Miners index (Solactive Gold Miners 20 NTR Index). Capital remains protected if the index falls by 30% or less, offering significant upside with defined downside risk.
These structured products are ideal for clients who want offshore exposure with built-in risk controls — without the need to actively manage their investments. With flexibility in currency, attractive early-exit features, and defined capital protection mechanisms, FNB continues to innovate in providing smarter offshore investing opportunities.
SUPPLIED.
