Samukelo Zwane | Head | Product | FNB Wealth & Investments | mail me |
Investing can feel like a daunting task, especially in unpredictable markets with an overwhelming number of options. Many South Africans want to grow their wealth but are equally 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 transparent, accessible and aligned with clear financial goals. The ABCs of structured products show how these tools provide peace of mind in uncertain markets. They balance risk and reward by offering exposure to financial markets while managing potential downsides. This makes them an ideal solution for South Africans who want to build their investment portfolio without taking unnecessary risks.
The evolution of structured products
The ABCs of structured products reveal how these investment tools have changed over time. Structured products were once available only to large institutions and high-net-worth individuals.
Structured products were often perceived as complex and inaccessible. However, as financial markets evolved, so did structured products. Today, they are built with transparency and accessibility in mind. This shift has made them an attractive option for a broader range of investors.
What are structured products?
Structured products are investment vehicles that balance growth potential with risk protection. Instead of buying shares or assets directly, investors put money into a structured product linked to the performance of a specific market index or a basket of assets.
Unlike shares and stocks, where returns depend entirely on market performance, structured products provide predefined outcomes. From the start, investors know what conditions must be met to earn a return. They also know what protection is in place if markets do not perform as expected.
One of the key benefits of structured products is their flexibility. They can be tailored to different risk levels. Some offer full or partial capital protection. Even if markets drop, investors may still recover some or all of their original investment. Others focus on providing enhanced returns, 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 individual objectives. If you are looking for growth, you can benefit from 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 you choose, structured products 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 seeking offshore exposure.
Risks and considerations
As with any investment, structured products carry certain risks and requirements.
The most important of these 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. It is important to choose a trusted provider.
- Market risk – while structured products include risk-mitigation features, extreme market conditions can still affect returns.
- Currency exposure – products denominated in foreign currencies offer diversification but also expose investors to exchange rate fluctuations.
Understanding these factors is crucial. They ensure that your chosen structured product aligns with your personal investment goals and risk tolerance.
A growing range of options
In a world of market volatility and global uncertainty, structured products meet the need for investment solutions that offer both protection and growth. They are designed for investors seeking offshore diversification without unnecessary risks.
Our structured product range has gained momentum since its launch in 2023. It includes both 100% capital-guaranteed and partially protected options, available in ZAR and USD. These products provide exposure to leading global indices while managing downside risk through capital guarantees. All solutions also offer the potential for early payouts, depending on the performance of the underlying index.
