Structured products getting more popular with UAE expats

Structured products are a pre-packed investment vehicle, intended to allow investors to gain exposure to equity indices, a basket of stocks, currencies, interest rates and commodities.

By David Hughes/Opinion

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Published: Tue 14 Jul 2015, 6:33 PM

In the world of apparel, there are continual and much-publicised trends. And there are also definable trends in investing, too. Much like in the fashion arena, there will be some trends that - justifiably - become "staples", and others will be fleeting fads.
In recent years, one investment solution that has become increasingly popular with UAE expats is structured products. 
Structured products are a pre-packed investment vehicle, intended to allow investors to gain exposure to equity indices, a basket of stocks, currencies, interest rates and commodities.
Structured products can be used for an extensive range of investment requirements, offering investors an array of substantial benefits. 
By providing an ability to pre-characterise the boundaries of investment risk and return, they are a way to potentially achieve a significant level of income without what is, typically, considered to be excessive risk. 
Structured notes can also add value to a well-diversified portfolio, provided they come in line with the investor's overall strategy. 
Early maturity dates and rewarding returns mean structured products are rapidly being viewed as the go-to option for investors and attracting more people who are looking to enhance their savings in a relatively short space of time, at a far more profitable rate than cash on deposit in a bank.
In addition, they offer significant flexibility and allow for a degree of customisation to investors, as they can be created according to a specific time frame and set level of risk. They can also be used to access different asset classes in private client portfolios, such as securities indices, currency basket or a particular equity. In addition they can be applied to enhance or hedge a portfolio in a defined manner. 
A further core benefit to structured products is that investors will know the returns they will receive at the end of a fixed period according to set market conditions.    There is a variety of prospective outcomes so investors can follow their own market view and spread the risk over a series of diversified investments, according to their performance expectations.
Another principal advantage is they can provide access to specific investments that may otherwise not be available. They can also allow for a more straightforward and cost effective blend of underlying assets and derivatives.
Like all financial products, structured notes are not suitable for everyone, and will always carry a certain degree of risk. Consulting with a specialist financial adviser is imperative as structured products are somewhat complex and the correct experience and analysis is required to mitigate the risks.
Nonetheless, for the right investors, structured products provide access to some market-beating returns combined with defined levels of capital protection and the potential for early maturities, thereby enabling investors to reach, and often surpass their investment objectives.
This is why I'm confident that the demand for structured products is a trend that will continue and develop amongst UAE expats and that these increasingly popular financial vehicles will become an ever-more integral part, or a "staple", of their portfolios over the longer-term.
The writer is Middle East divisional manager of deVere Group. Views expressed are his own and do not reflect the newspaper's policy.

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