They have the wind in their sails. With the rise in interest rates, structured products – or formula funds – once again offer attractive returns. Original in their design, these investments pay, at the end of a period of between one and twelve years, interest – or “coupon” in the jargon – the overall amount of which depends on the evolution of an underlying asset. This term most often refers to a stock market index, such as the Euro Stoxx 50 for euro zone markets, a basket of securities or a company share, but it can also be a commodity, or even a cryptocurrency.
At least one year after its marketing, then at a defined frequency – daily, monthly, quarterly, half-yearly or annually – the issuing bank records the price of the underlying and compares it to that recorded when the structured was launched. If the price rises, the capital is returned with the planned coupon, and the product is recalled, that is to say closed, before the initially planned end date. Otherwise, it is renewed. On the contractual closing date, if the product has not been repaid in advance, the invested capital is repaid in full if it is a guaranteed capital structure or partially in the case of a structured with protected capital.
When subscribing, all the support parameters are known. “The buyer knows in advance the maximum duration of the investment, as well as the loss conditions and the profit objectives,” underlines Guillaume Eyssette, associate director of the wealth management firm Gefinéo. A formula which particularly appeals to savers at a time when uncertainty prevails on the stock markets. Especially since for about a year we have been finding guaranteed capital products offering an attractive coupon – of the order of 3 to 5% depending on the duration of the investment -, something that we had no longer seen on the market. market for at least ten years. But, be careful, you have to be vigilant on several points.
Structured products can be very successful as they currently offer annual interest rates of up to 12%, depending on the level of risk. The range of products is diversified, with a very wide range of performance objectives. We still need to find the right balance between a high coupon and sufficient security mechanisms. Protecting capital at maturity is one of the keys, but it is not the only one. The frequency of product recall must also be taken into account. “It’s fundamental, believes Guillaume Eyssette. The closer it is, the more likely you are to cash in your capital with interest. For an equivalent potential return, it is better to favor a structured monthly return rather than a recall product. annual.”
You must also be very careful when choosing the underlying. It is essential to understand the composition of the latter to better judge its future evolution. This requires a minimum of knowledge and skills in stock market matters, but also to carefully read the pre-contractual documentation before committing. Ideally, you should bet on an underlying whose price will be rather bearish in the first years, so that the coupons can increase the capital, but with a very strong chance of rising sustainably before the maturity of the product, to avoid a capital loss. Above all, keep in mind that not all financial assets are equal. Thus, a general index will be more secure than a sectoral index, which itself will be less risky than a basket of shares and even less perilous than a single security.
For those who plan to buy a structured vehicle for the first time or who want to take a limited risk while receiving interest, it is advisable to choose a vehicle based on a classic index, with a capital guarantee at maturity and providing a monthly reminder frequency. It will offer a more modest annual return, around 4.5% to 5%. But this remuneration will always be better than a ten-year French State bond, which yields 3%.