what are structured products

Structured products are pre-packaged investments that include assets linked to interest plus one or more derivatives. They are generally tied to an index or basket of securities and are designed to facilitate highly customized risk-return objectives. Structured products aspire to provide investors with highly targeted investments tied to their specific risk profiles, return requirements, and market expectations. Structured products can be principal-guaranteed that issue returns on the maturity date. Benefits of structured products may include principal protection, tax-efficient access to fully taxable investments, and enhanced returns within an investment (depending on the type of structured product) . However, structured products also have some risks, including credit risk, lack of liquidity, and complexity of the return calculations. Structured products can range from relatively simple to highly complex. They are created by investment banks and often combine two or more assets, and sometimes multiple asset classes, to create a product that pays out based on the performance of those underlying assets.