Markets Insight
  •  2/3/2022

Structured Investments in Action Part II: Risk-Managed Growth Potential

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How and why structured investments are used within a portfolio to pursue growth objectives.

Structured investments have evolved a lot over the last few decades, with increasingly flexible ways to tailor a portfolio to the needs of investors looking for either income or growth.

Growth-oriented structured investments are typically used to achieve consistent market exposure, with embedded protective features that can provide a degree of risk management in a portfolio. Other times, and still on the growth side of the portfolio, structured investments can be used to try to capitalize on a specific market outlook (bullish or bearish) or to gain efficient, risk-tailored exposure to strategies that may be difficult to access directly.

Growth investors considering any structured investment should do the following:

  • View structured investments as buy-and-hold strategies whose payouts are not guaranteed until maturity
  • Understand there is no guaranteed secondary market and that while issuers have historically bought back structured investments, they are under no legal obligation to do so
  • Be comfortable with the issuer’s creditworthiness since payments made by structured investments are subject to the credit risk of the issuer

What do growth-oriented solutions look like in the structured investment world? A high-level  overview can shed some light:

Growth solutions:

  • Enable investors to participate in the potential growth of a desired market, often with some risk mitigation
  • Are generally characterized by a single payment at maturity
  • Are tied to the return of an underlier, such as an equity index, a basket of indices or a stock
  • Can offer full principal protection, partial protection, or no protection at all

Highlighted below are a few hypothetical scenarios to show how structured investments can be used to achieve growth objectives.

Growth use case #1: international exposure, with a degree of protection

The objective: An investor seeks the potential growth and diversification that may come with international equity exposure. She is optimistic about emerging markets specifically, and comfortable with equity risk. However, she would appreciate some downside protection should those markets experience a slight to moderate decline.

A potential solution: A market linked growth note with upside participation tied to a broad emerging market equity index, along with barrier protection.  

This type of note can be visualized in the below hypothetical illustration:

Underlier: MSCI Emerging Markets Index

Term: 4 years


  • Leveraged and uncapped participation in any gains in the underlier at maturity
  • Return of principal, so long as the underlier has not declined below the barrier at maturity


  • The potential for losses that are 1:1 from the underlier’s initial level should the underlier close below the barrier level at maturity; losses could be significant
  • The underlier’s return is based on price return only and does not include dividends

Growth use case #2: expressing an investment view

The objective: An investor follows the market closely and feels that over the coming 18 months U.S. equity returns may be more muted, or even slightly negative (he expects single­-digit returns, either positive or negative). He wants to remain engaged in the markets, but also somewhat protected if market gains do not continue.

A potential solution: A market linked growth note that offers exposure to U.S. equities with the potential for a return regardless of whether market performance is positive or negative and a degree protection against a market decline.

This type of note can be visualized in the below hypothetical illustration:

Underlier: S&P 500 Index

Term: 18-months


  • Upside participation (up to a cap) in any gains in the underlier
  • Payment even if the underlier return is negative, as long as negative return is not below the hard buffer level at maturity


  • The hard buffer only protects principal against a degree of decline in the underlier; losses could be significant
  • The underlier’s return is based on price return only and does not include dividends

Informed Investing

Structured investments come in a wide variety with different terms and conditions. There’s one for almost any market outlook or investment goal, giving investors the chance to stay in the market and choose how much protection they need to feel comfortable.

When considering any structured investment, investors should understand the type of protection it offers, if any, as well as its pay-out potential, by carefully reviewing the offering documents before investing.

Want to learn more? Connect with us:

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©2022 SIMON Markets LLC. All Rights Reserved. | Originally Published 2022.02 | Updated 2022.07


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