Investing in Structured Bonds

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Structured bonds are so called because they originate from a combination of two elements:

A. A fixed income security, with maturity ranging from a few months to several years, with a coupon payable periodically or at maturity.

B. A contract determining the coupon or value of capital at maturity, in accordance with the price trend of one or more financial parameters, such as stock market indexes or combinations of indexes, shares or share portfolios, common funds, exchange rates or raw materials.

Structured bonds are suitable for all investors who, in this way, are able to change the return or risk on their portfolios in ways, which would otherwise be impossible or extremely difficult to accomplish direct on financial markets.

Through financial engineering, it is possible to adjust structures to meet the requirements of prudent savers or more speculative investors and to capture precise market trends.

If you would like to invest in stocks, without running the financial risk of losing your capital, then the most common form of structured bond is suitable for you.

This envisages, on maturity, a payment proportionate to the variation in value of the index or securities chosen as a parameter, but only if positive, while at the same time it guarantees a minimum coupon and redemption of capital at maturity.

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You can thus enter the stock market with a measured bond investment which often includes the benefit of a regular coupon.

If you are prepared to forfeit a minimum return, you can opt for bonds with more complex structures which, however, in the event of a favorable market trend, offer greater appreciation potential.

If you are already familiar with the stock-market, you can invest in short-term reverse convertible securities offering higher coupons than those paid on government securities, but without the guarantee of capital redemption value linked to the performance of a share or basket of shares.