Structured notes: definition, features and description

Profitable investments are a topic that does not lose its relevance. In connection with this, various instruments are constantly being formed, which make it possible to deduce income to a fundamentally new level. One of them is structured notes.

A little bit about structured products

It is worthwhile to understand that there are two large groups in the financial services market that compete among themselves, trying to attract the attention of customers. We are talking about banks and companies related to the stock market.

In recent years, banking structures have found themselves in a better position, so many investment companies have made great efforts to create new attractive products that allow them to receive high returns. The basis of active competition lay the principles of deposit, which eventually led to the creation of structural products. It is this category that is defined as structured notes.

What should be understood by this term? In fact, we are talking about a unique format for making profits, which makes it possible to manage key instruments of the stock market (deposits, bonds), as well as their derivatives (swaps, options, futures) on a fundamentally new level.

This is confirmed by the fact that the use of structured notes quite often leads to a 100% return on invested funds and even more so. Obviously, this is a fairly bright result, which minimizes the risk of loss of funds invested.

Bank deposits with such indicators can not compete, respectively.

Trying to understand what structural (structural) notes are, you can look at this product a little differently and define it as a competent combination of traditional investment-financial and banking instruments (futures, options, etc.). Speaking even simpler, this is a mix of traditional ways of making a profit, which, thanks to a skilful combination of standard schemes, allows you to get a new, much more efficient way to increase profits.

Reliability

Like any product that is not quite familiar, structured notes can cause a certain distrust. In fact, there is no reason for such a reaction.

The bottom line is that the degree of capital protection of investment products of this type can be defined as high. More specifically, it can provide a guaranteed return at the refinancing rate of the Central Bank of Russia.

But structural products have their own limiting factors. One of them is their cost. The point is that only wealthy people can use them, others simply do not have enough money. The starting cost of such tools starts at $ 10 thousand and can reach half a million $.

The good news is that some of the large retail banks offer the opportunity to purchase structured products at a price of $ 3,000.

The first structured note

To use similar products began back in 1969 on the American stock market, and since then they have undergone many changes. As for the Moscow stock exchange, for the first time on this market the note was introduced by the group of companies FG BCS. It was defined as a structured credit bond.

The issuance of such securities in Russia had not previously been practiced. The new product was tied to three large banks (Sberbank, VTB and VEB). As for the payment, it was made in the form of a semi-annual coupon with a yield of 13% for 12 months. At that, the nominal value of the product was 80 thousand rubles. The maturity date for the bonds was set for April 2017.

Principle of operation

When an investor acquires such a product as a structured note, a bond, he connects his finances to the whole set of instruments. It will also be fair to note that money is actually transferred to trust management.

This process has a legal basis and on the part of the law is absolutely legal (FFMS Order No. 07-37 / pz-n). At the same time, there is initially provision of a certain level of profitability, which the investor can rely on.

Return of invested money is guaranteed through the use of a proven scheme: the division of investments into two parts. The first and largest of them is invested in those instruments that have a fixed yield. It is this part that at the end of the term should bring 100% compensation. Here, bonds with a high level of reliability or a bank deposit can be used.

The second part is invested in highly profitable, but significantly more risky operations. Which, in many respects determines the structure of the note, but usually it is work with the volatility of the market, the change in the index of shares and other risky options that give an opportunity to get a significant increase in invested funds.

Thus, an investor who buys structured notes can expect at least 100% compensation, at best and completely different interest.

General Types

There are several types of structural products that are used most often:

• Notes with capital protection. The key difference of this product is a full refund of the amount at the time when the final payment will be made. And this fact does not depend on how effective the assets underlying the product turned out to be in the end. It is worthwhile to understand that, in comparison with other species, this is the least profitable, but the most reliable.
• Phoenix sheet music. The structure of this tool makes it possible to receive monthly payments. Another convenient periodicity is also available (once a quarter or every six months). Because of such frequent payments, this type of notes can not be called the most profitable, but the investor on an ongoing basis can derive his profit.

• Notes with automatic termination. In this case, there are no such frequent payments as with Phoenix. The goal is the continuous accumulation of the required amount, which automatically ends when the established profit threshold is reached. Until then, withdraw money will not work. After completion of the process, the investor receives all the invested money and profit.

New types

Varieties of notes are many. The financial and stock market develops, and after them investment products are improved .

If we talk about examples, we can recall the so-called "Buster". At the heart of this structured note is the use of financial leverage. His goal is a quick profit, which is accompanied by high risks. There is one basic asset with which a significant increase in investment is achieved. This product does not offer a guaranteed return, nor does it provide stable coupon payments.

New structured notes include a tool such as "Autocoll." In the Russian market, it is becoming increasingly popular. It is based on the sale of volatility. In this case, high profit with a high level of risk is also considered as a priority. Under such a scheme, conditional capital protection is present, which largely depends on the dynamics of changes in quotations of key assets.

Investors also use a "digital" note. This product will be of interest to those who do not intend to endure significant risks and rely on a moderate but stable growth in investments. At the same time coupon payments are available to the investor.

Results

Those who tried to get an answer to the question "structured notes - what it is" will easily evaluate the relevance and popularity of this product in the field of investment.

These tools allow you to choose the most acceptable way to multiply your own funds: slowly and safely or quickly, but at high risk. In any case, the popularity of such an effective market offer, like notes, will continue to grow.