What is a structured product?

A structured product is an investment that is pre-packaged with either an equity or income focus. The purpose of the investment is usually to protect your capital with above average market or income returns.

Structured products generally have some common characteristics:

• The managers need some time to beat the markets, with this they need liquidity in the investment and therefore require you to keep your investment in place for 5 years. If you withdraw earlier, there is usually a penalty.
• The capital protection (the amount you are guaranteed to get back from your investment) will either be full, partial or conditional. Most structured products guarantee the investment but each one is quite unique. Please read the T and C’s before investing to understand each structure.
• Returns are gained through the asset manager pre selecting shares, an index, fund, commodity, currency, ETF or even a combination of these. Potential returns are predetermined and typically based on a set of criteria being met by the underlying asset. The asset is typically a basket of shares, an index, fund, commodity, currency, ETF or a combination of these.

How it works

These products are made available to our investors by means of a bookbuild before they are listed on the JSE, and similar to an equity IPO, interested investors need to indicate their interest by applying for the product prelisting.

To participate in the prelisting, you would need to navigate to New Listings on the EasyEquities App or website. You should see structured products (when available) here.

Once the prelisting period is over and the bookbuild is complete, the product will be removed from New Listings and will appear in your EasyEquities ZAR account under your account overview.

How it’s structured

Capital protected amount
The issuer of the structured product (usually a bank or financial institution), will place a portion of your investment as a deposit, which is then guaranteed to grow to the capital protected level at end of the fixed term.

Returns
A further portion of your money will then be used to purchase an option (derivative) aimed at generating the investment return. The underlying asset on which the return is generated will be chosen at the outset, and will usually offer investors a higher percentage return than the actual underlying asset would provide if purchased directly. This is known as the participation in the returns.

Here’s an example of how that could look:
Investors may be able to achieve 70% returns in Rands if the Eurostoxx 50 Index ends positive after a 4 year period.

The returns at the maturity of a structured product would then typically be calculated as: Capital protected amount + (underlying asset return * participation).

Benefits of investing in structured products

You can potentially achieve the same, if not, better returns than the underlying market without taking the same level of risk. It is a great way to diversifying your investment returns and look after your capital at the same time. You have the comfort that a portion of your money is guaranteed to be preserved, and another portion has the potential to deliver you returns that are the same or better than what you would normally get from the same product in the market.

No minimums

Ordinarily these products are only available to ‘sophisticated’ investors and generally have a high investment minimum which excludes the vast majority of people. On EasyEquities all investors are able to get their piece for as little as they chose by simply applying for the amount they wish to invest during the bookbuild - we do the rest.