AS investment markets and economies begin to feel more unpredictable, investors are understandably looking for secure ways to safeguard their capital while still enjoying meaningful returns.
Volatility in global markets, coupled with local economic uncertainty, has left many wondering where to place their money without taking on excessive risk. Against this backdrop, structured products have steadily gained traction as a compelling investment solution.
Over the past few years, FNB has worked to make structured products more accessible to South African investors, ensuring that these solutions are not just reserved for large institutions. Since the launch of our first tranche of structured products in 2023, we have seen steadily increasing demand from clients who want to protect their capital while participating in global growth.
FNB is now launching its fourth tranche of structured products, which builds on “our tradition of providing investors with carefully designed options that align with market conditions and their investment goals” says Samukelo Zwane, Head of Product at FNB Wealth and Investments.
While structured products were once seen as complex instruments designed exclusively for institutional investors, that perception is outdated. The evolution of financial markets, coupled with advancements in investment technology, has made structured products more accessible than ever. These investment solutions now offer most investors a way to achieve tailored exposure to global markets while maintaining a good level of capital protection.
One of the most appealing aspects of structured products is their ability to balance risk and reward. Investors no longer have to choose between the potential for returns and the security of their capital, because structured products offer both.
Certain products, for example, provide 100% capital protection at maturity, meaning investors won’t ever lose their initial investment regardless of market fluctuations. Others include mechanisms that allow investors to participate in market growth at an enhanced rate. For example, a product linked to a global index might offer 200% participation, effectively doubling the investor’s returns if that index ends the investment term in positive territory.
Despite these advantages, some scepticism about structured products still lingers.
Foremost among these concerns is the belief that structured products are expensive, risky and lack liquidity. The reality is quite different. Today’s structured products are designed for ease of investment, listed on exchanges and operate under clear regulatory frameworks, ensuring transparency.
Costs have also come down significantly in recent years, making them far more affordable. And while some structured products have recommended holding periods to maximise benefits, many can be traded or exited before maturity if certain criteria are met.
Investors who take the time to understand these products quickly realise that contrary to all these misperceptions, they are a well-designed tool for managing risk and optimising the potential for competitive returns, even in uncertain times.
In most instances, structured products are also highly versatile, with a variety of options allowing investors to choose between different structures tailored to their needs – whether they are seeking exposure to global equity indices, alternative asset classes, or specific sectors such as luxury goods or technology. They are also very useful as part of a diversified investment portfolio, complementing traditional assets like stocks and bonds. At a time when diversification is more important than ever, structured products provide an effective way to access new opportunities without taking on excessive risk.
Of course, like any investment, structured products are not a one-size-fits-all solution, continued Zwane.
They require careful consideration of the terms, market conditions and an investor’s personal financial goals. But for those who take the time to explore them, they offer a powerful way to navigate today’s investment landscape with greater confidence.
Continued Zwane: “As the market continues to evolve, ensuring that your investment strategy keeps pace is essential – and structured products may be the solution you’ve been looking for to balance security with opportunity”.
Image supplied (Samukelo Zwane, Head of Product at FNB Wealth and Investments).
