The resulting investment provides investors with customised risk and return profiles that can be tailored to their specific needs and goals. In this article, we'll explore the rise of structured products in international investing and the benefits they offer to investors.

Why are Structured Products Becoming Popular in International Investing?

Structured products are becoming popular in international investing because they offer several benefits over traditional investments. One of the main benefits is customization. Structured products can be tailored to meet specific investment goals and risk profiles. For example, an investor may want to invest in a specific sector, but also want downside protection against market fluctuations. A structured product can be designed to provide exposure to that sector while also offering a degree of downside protection.

Another benefit of structured products is their flexibility. Structured products can be designed to provide exposure to a wide range of asset classes, including equities, fixed income, commodities, and currencies. They can also be designed to meet different investment horizons, from short-term to long-term.

In addition, structured products can offer higher returns than traditional investments. Structured products can be designed to offer higher returns than traditional investments by incorporating leverage or other derivatives. However, it's important to note that higher returns often come with higher risk.

Finally, structured products can provide exposure to international markets that may be difficult to access through traditional investments. Structured products can be designed to provide exposure to specific regions or countries, or a basket of international securities.

Types of Structured Products for International Investing

There are several types of structured products that investors can use to gain exposure to international markets. Some of the most common types include:

Autocallables: Autocallables are a type of structured product that allows investors to earn a fixed return if the underlying asset reaches a certain level by a specified date. If the asset does not reach the specified level, the investor may receive a lower return or no return at all.

Reverse convertibles: Reverse convertibles are a type of structured product that combines a fixed-income investment with a call option. Investors receive a fixed income payment, but the return is dependent on the performance of an underlying asset. If the asset performs poorly, the investor may not receive the full return.

Equity-linked notes: Equity-linked notes are a type of structured product that combines a fixed-income investment with exposure to equities. The return is linked to the performance of one or more underlying equities.

Currency-linked notes: Currency-linked notes are a type of structured product that combines a fixed-income investment with exposure to currencies. The return is linked to the performance of one or more underlying currencies.

Commodity-linked notes: Commodity-linked notes are a type of structured product that combines a fixed-income investment with exposure to commodities. The return is linked to the performance of one or more underlying commodities.

Risks Associated with Structured Products

Like any investment, structured products come with risks. One of the main risks is that the performance of the structured product is dependent on the performance of the underlying asset or assets. If the underlying asset performs poorly, the investor may not receive the full return or may even lose money.

Another risk is that structured products are often complex and difficult to understand. Investors should carefully read the prospectus and seek advice from a financial advisor before investing in a structured product.

In addition, structured products are often not liquid and may have limited secondary market trading. This can make it difficult for investors to sell.