Tristan de Gouvion Saint Cyr financial planner. Tristan de Gouvion Saint Cyr investment portfolio management expert. Tristan de Gouvion Saint Cyr financial analyst shares his views on structured products.Tristan de Gouvion Saint cyr talks about structured products and how they can benefit HNW investors.
Tristan de Gouvion Saint Cyr stresses the fact that there is no single or unique definition of structured product.
Tristan de Gouvion Saint Cyr quotes wikipedia on the definition of structured products in finance, which is a pre-packaged investment strategy based on derivatives, such as a single security, a basket of securities, options, indices, commodities, debt issuance and/or foreign currencies, and to a lesser extent, swaps.
Tristan de Gouvion Saint Cyr Financial Expert Tristan de Gouvion Saint Cyr Investment Expert
1. Tristan de Gouvion Saint Cyr
Tristan de Gouvion Saint Cyr Views
on Structured Products
2. Structured Product
• Tristan de Gouvion Saint cyr talks about structured
products and how they can benefit HNW investors.
• Tristan de Gouvion Saint Cyr stresses the fact that there
is no single or unique definition of structured product.
• Tristan de Gouvion Saint Cyr quotes wikipedia on the
definition of structured products in finance, which is
a pre-packaged investment strategy based
on derivatives, such as a single security, a basket of
securities, options, indices, commodities, debt issuance
and/or foreign currencies, and to a lesser extent,
swaps.
3. Cont..
• A feature of some structured products is a
"principal guarantee" function, which offers
protection of principal if held to maturity. For
example, an investor invests 1000 dollars; the
issuer simply invests in a risk free bond that
has sufficient interest to grow to 1000 after
the five-year period. This bond might cost 800
dollars today and after five years it will grow
to 1000 dollars.
4. Cont..
• With the leftover funds the issuer
purchases the options and swaps needed to
perform whatever the investment strategy is.
Theoretically an investor can just do these
themselves, but the costs and transaction
volume requirements of many options and
swaps are beyond many individual investors.
5. Cont..
• As such, structured products were created to
meet specific needs that cannot be met from
the standardized financial instruments
available in the markets. Structured products
can be used as an alternative to a direct
investment, as part of the asset allocation
process to reduce risk exposure of a portfolio,
or to utilize the current market trend.
6. Cont..
• Tristan de Gouvion Saint Cyr says that investors may
benefit from the following advantages:
• principal protection (depending on the type of
structured product)
• tax-efficient access to fully taxable investments
• enhanced returns within an investment (depending on
the type of structured product)
• reduced volatility (or risk) within an investment
(depending on the type of structured product)
• the ability to earn a positive return in low yield or flat
equity market environments
7. Cont..
• However, Tristan de Gouvion Saint Cyr warns
investors about disadvantages including:
• credit risk - structured products are unsecured
debt from investment banks
• lack of liquidity - structured products rarely
trade after issuance and anyone looking to sell
a structured product before maturity should
expect to sell it at a significant discount
8. Cont..
• No daily pricing - structured products are
priced on a matrix, not net-asset-value. Matrix
pricing is essentially a best-guess approach
• highly complex - the complexity of the return
calculations means few truly understand how
the structured product will perform relative to
simply owning the underlying asset
9. Cont..
• Structured products are by nature not
homogeneous - as a large number of
derivatives and underlying can be used - but
can however be classified under the following
categories
• Interest rate-linked notes and deposits
• Equity-linked notes and deposits
• FX and commodity-linked notes and deposits
• Hybrid linked notes and deposits
11. Cont…
• Tristan de Gouvion Saint Cyr insists on the fact
that the risks associated with many structured
products, especially those products that present
risks of loss of principal due to market
movements, are similar to those risks involved
with options. The potential for serious risks
involved with options trading are well-
established, and as a result of those risks
customers must be explicitly approved for
options trading, making them suitable to
accredited investors only.
