What is a Structured Product?
  • A tailor-made investment solution
  • Made upon different asset classes as underlying (equity, bonds, fx, commodities, funds…)
  • Issued by the best investment banks worldwide
Why investing in Structured Products ?
  • Because it is a way to profit from the performance of a certain underlying… while at the same time protecting your capital in the case of a negative scenario..
How to invest in Structured Products?
  • Empire is the first aggregator platform for Structured Products. Thanks to its revolutionary business model, it allows investors to diversify their portfolio by offering them products issued by more than 20 investment bank
Categories of Structured Product

Depending on the level of risk and return, four different categories of Structured Products can be distinguished:

  • Capital Protection
  • Yield Enhancement
  • Participation
  • Leverage
Capital Protection Products
  • Capital Protection Products are connected to the Credit Risk of the  underlying(s) and offer a (quasi) full protection of the nominal value at  maturity
  • Additionally they offer a return linked to the underlying  performance, usually in the form of a fixed coupon, but also in the form  of participation or a one-payment at maturity
  • These kinds of products suit risk-averse investors needs
  • Given the low  risk level, the maturity of these products will be, on average, longer than  the one of other products
Participation Products
  • Participation Products offer the investor a participation on the performance of the underlying(s) and offer a conditional protection of the nominal value at maturity, according to the risk aversion of the  investor
  • The condition according to which the capital is protected is  determined a priori, at the moment the note is structured
  • It can also  provide gains in the form of coupons
  • These kinds of products suit moderate to “risky” investors with a  directional view
  • The maturity of these products usually range from one  to several years
Leverage Products
  • Leverage Products provide the opportunity to profit from the  performance of the underlying(s) thanks to a certain degree of leverage (usually 2x, 3x), and at the same time incurring in a relatively small  outlay
  • These products do not offer notional protection: only a stop-loss level can be granted in order to avoid losses over a certain amount
  • Given the nature of these products, they are suitable to risk-taking  investors
  • Because of the speculative nature of these products, their  maturity is usually short-term
Yield Enhancement Products
  • Yield Enhancement Products are connected to the Performance of the  underlying(s) and offer a conditional protection of the nominal value at  maturity, according to the risk aversion of the investor
  • Additionally they  offer a return linked to the underlying performance, usually in the form  of a (periodical) coupon
  • In these products the investor gives up part of  the potential unlimited gain over a certain underlying in exchange of a protection of the notional invested
  • These kinds of products suit moderate to “risky” investors
  • The maturity  of these products can vary from some months to several years
Credit-Liked Notes (CLN)

Brief Description

  • Credit-Linked Note is a structured note aimed at investors with an expectation of No Default by the Credit Reference. A Credit-Linked Note pays a fixed coupon periodically unless there is an early termination, which would happen if the Credit  Reference suffers a Credit Event.* In this case, the investor will get back the Rescue Value determined by International Swaps and Derivatives Association (ISDA).

To whom is aimed at

  • Credit-Linked Notes are aimed at risk-averse investors who prefer to receive a fixed limited coupon in exchange of a full protection of their notional  invested Benefits

100% of the notional paid at maturity

  • Periodic, guaranteed coupon
  • Coupons higher than investing in the underlying directly

In case of a default of the credit reference, losses limited to the Recovery Rate Risks

  • Risk of partial loss because of a default of the Credit Reference
Capital Protection with Participation

Brief Description

Capital Protection with Participation products provides a certain level of guaranteed protection of  the notional (typical ranges can be 100%, 95%, 90% of the capital guaranteed), plus a participation on the performance of the underlying. The participation can be full participation (100%),  leveraged, or less than 100%. The participation can be also capped up to a certain level. In these products there can also be a Credit Reference that, if it doesn't incur in a Credit Event, will  guarantee the percentage of the capital protected. In case of a Credit Event, the investor will get  back the Rescue Value determined by ISDA.

To whom is aimed at

  • Capital Protection with Participation notes are aimed at risk-averse investors that also have a certain degree of directional expectation on the performance of the underlying

Benefits

  • A substantial percentage of the notional guaranteed at maturity
  • Participation in the performance of the underlying
  • Possibility to leverage the participation
  • In case of a default of the credit reference, losses limited to the Recovery Rate

Risks

  • Risk of partial loss because of a default of the Credit Reference
  • If not the 100% of the nominal is protected, a negative performance of the underlying might lead to a partial loss of the nominal
Reverse Convertible

Brief Description

A Reverse Convertible is a structured note that allows investors to receive periodic  guaranteed coupons while at the same time offering a conditional protection of the  notional. The barrier can be European, in which case the product is called Barrier Reverse Convertible, or in the form of Low Strike, in which case the product is  called Standard Reverse Convertible. To whom is aimed at Barrier Reverse Convertibles are aimed at moderate to risk-taking investors that do not  have a strong directional expectation of the movement of the underlying(s).

Benefits

  • Periodic guaranteed coupons
  • If the barrier has not been breached, 100% notional recovery at maturity
  • Protection on the downside of the notional invested up to the barrier
  • In case of breach of the barrier, recovery of part of the notional through cash or physical delivery

Risks

  • The investor doesn’t receive potential dividends that could have received if investing directly in the underlying
  • Partial notional losses if the barrier is breached (at maturity in case of an European barrier or during the life of the product in case of an American  barrier)
Callable Reverse Convertible

Brief Description

A Callable Reverse Convertible is a structured note that allows investors to receive  periodic guaranteed coupons while at the same time offering a conditional protection  of the notional. During the life of the product, at each observation, the product can be  redeemed by the issuing bank, with the anticipated termination of the product and the  full redemption of the notional invested and the payment of the coupons up to that  observation. As above, it can be of the type ”European” or ” Low Strike”. To whom is aimed at Callable Barrier Reverse Convertibles are aimed at moderate to risk-taking investors  that do not have a strong directional expectation of the movement of the underlying(s).

Benefits

  • Periodic guaranteed coupons
  • If the barrier has not been breached, 100% notional recovery at maturity
  • Protection on the downside of the notional invested up to the barrier
  • In case of breach of the barrier, recovery of part of the notional through cash or physical delivery

Risks

  • If redeemed beforehand by the issuing bank, the investor might lose some of the coupons due after the  calling observation
  • Partial notional losses if the barrier is breached (at maturity in case of an European barrier or during the life of  the product in case of an American  barrier)
Autocallable

Brief Description

An Autocallable is a structured note that allows investors to receive periodic  conditional or guaranteed coupons while at the same time offering a conditional  protection of the notional. During the life of the product, at each observation, the  product can be auto-redeemed if all the underlyings perform above the Autocall Trigger level. This leads to the anticipated termination of the product and the full  redemption of the notional invested and the payment of the coupons up to that  observation.

To whom is aimed at

  • Autocalls are aimed at moderate to risk-taking investors that do not have a  strong directional expectation of the movement of the underlying(s)

Benefits

  • Periodic guaranteed or conditional coupons
  • If the barrier has not been breached, 100% notional recovery at maturity
  • Protection on the downside of the notional invested up to the barrier
  • In case of breach of the barrier, recovery of part of the notional through cash or  physical delivery
  • If the product is auto-called with anticipation, 100% of the notional invested is redeemed and the investor has the possibility to issue a new note  without investing additional capital

Risks

  • Partial notional losses if the barrier is breached (at maturity in case of an European barrier or during the life of  the product in case of an American  barrier)
Low Strike Autocallable

Brief Description

A Low Strike Autocallable is a structured note that allows investors to receive  periodic conditional or guaranteed coupons while at the same time offering a  conditional protection of the notional. It has got the same auto-callable features as in  the ”Autocallable” above, but with an additional protection of the notional on the  downside at maturity.

To whom is aimed at

  • Low Strike Autocalls are aimed at moderate risk taking investors that do not  have a strong directional expectation of the movement of the underlying(s).

Benefits

  • Additional protection of the notional at maturity
  • Periodic guaranteed or conditional coupons
  • If the barrier has not been breached, 100% notional recovery at maturity
  • Protection on the downside of the notional invested up to the barrier
  • In case of breach of the barrier, recovery of part of the notional through cash or physical delivery
  • If the product is auto-called with anticipation, 100% of the notional invested is redeemed and the investor has the possibility to issue a new  note without investing additional capital

Risks

  • If auto-called beforehand, the investor might lose some of the coupons due after the calling  observation
  • Partial notional losses if the barrier is breached (at maturity in case of an European barrier or during the life of  the product in case of an American  barrier)
Bonus Certificates

Brief Description

A Bonus Certificate is a structured note that allows investors to participate in the  performance of the underlying. At maturity, the product returns 100% of the notional  invested as minimum redemption as long as the underlying finishes equal or above  the capital protection barrier. If the barrier is breached, the products is transformed in a tracker certificate of the underlying. At maturity, this product can pay a bonus in  the form of coupons.

To whom is aimed at

  • Bonus Certificates are aimed at moderate to risk-taking investors that also have a  moderate directional expectation of the movement of the underlying(s).

Benefits

  • If the underlying performs positively, the investor can get high returns at maturity
  • Protection on the downside of the notional invested up to the barrier
  • If the barrier has not been breached, 100%  notional recovery at maturity
  • In case of breach of the barrier, recovery of part of the notional through cash or physical delivery

Risks

  • The investor doesn’t receive potential dividends that could have received if investing directly in the underlying
  • Partial notional losses if the barrier is breached (at maturity in case of an European barrier or during the life of  the product in case of an American  barrier)
Participation Products Outperform Certificates

The outperformance feature allows the investor to  have a boost on the performance of the underlying. This feature can to be added in case of a strong  directional view of the underlying performance. This product can have a Cap on the upside to limit  the gains. This makes the product cheaper by  lowering the option price. Bonus Certificates This product allows the investor to participate in the  performance of the underlying up to a certain level.  The bonus feature allows the investor to gain more  (the bonus) if the Worst Of is above the barrier. This  product can have a Cap on the upside to limit the gains. This makes the product cheaper by lowering  the option price.

Twin - Win

Brief Description

A Twin – Win product offers to the investor participation both in rising and in falling  markets. The product offers a certain level of downside as well as upside protection  of the notional invested. The product also offers periodic conditional or guaranteed  coupons. In some cases, it can come with callable or autocallable features.

To whom is aimed at

  • Twin - Wins are aimed at moderate investors that do not have a clear view of the  direction of the market but that suppose it won’t move, positively or negatively, more than a certain level in comparison to the strike level.

Benefits

  • If the barrier has not been breached, 100% notional recovery at maturity
  • Protection on the downside as well as on the upside of the notional invested up to the barrier
  • In case of breach of the barrier, recovery of part of the notional through cash or physical delivery

Risks

  • The investor doesn’t receive potential dividends that could have received if investing directly in the underlying
  • Partial notional losses if the barrier is breached (at maturity in case of an European barrier or during the life of  the product in case of an American  barrier)
Leverage Products - Mini Futures

Brief Description

A Mini Future is a structured note that allows investors to profit from the  performance of the underlying(s) with a leverage of 2x – 3x. The leverage allows the  investor to incur in a relatively small outlay of the notional. These products do not  offer notional protection: only a stop-loss level can be granted in order to avoid losses over a certain amount. Given the nature of these products, their maturity is usually short-term.

To whom is aimed at

  • Mini Futures are aimed at risk-taking investors that have a strong expectation on the movement of the underlying.

Benefits

  • Possibility to leverage on the performance of the underlying
  • No need to provide the full cash value of the underlying, thanks to the leverage
  • Can be short-term maturity

Risks

  • Risk of losing the entire notional invested since there are no protection barriers against unexpected movements of the underlying
Annex 1 – Types of Protections

Structured Products can have different types of notional protection, among which:

American Barrier:

  • The notional invested is protected until the underlyings do not fall below this barrier
  • The level of  the underlying is observed during the entire life of the product, and the notional redeemed at maturity

Protection  level:

  • Medium

European Barrier:

  • The notional invested is protected until the underlyings do not fall below this barrier
  • The level of  the underlying is observed only at maturity

Protection Level:

  • Medium/high

Low Strike:

  • The notional invested is protected until the underlyings do not fall below this “barrier”
  • The level of the  underlying is observed only at maturity
  • The difference with an European Barrier can only be seen in the case of a  breach of the protection level
  • In this case, the Low Strike allows a much higher protection of the notional, taking  into consideration a “Low” strike level of the underlyings instead of the 100% value at the strike date
  • E.g. A product  has a ”Low strike barrier” of 60.00%. At maturity, the underlying falls by 50.00%. The notional percentage that will  be recovered will be equal to: (underlying level/low strike level) = 50.00%/60.00% = 83.33% instead of a recovery of only 50.00% of the notional in case of a European or an American barrier

Protection level:

  • High