Structured funds are sophisticated financial instruments designed to meet investors’ specific needs with respect to return, risk management, and diversification. By combining various underlying assets such as equities, bonds, or derivatives, these funds deliver personalised strategies tailored for various market scenarios.
Unlike traditional financial products, structured funds can offer partial or full capital protection while providing exposure to specific market opportunities. They appeal particularly to investors seeking a balance between performance and risk control.
At Quintet Luxembourg, structured funds form a core part of our offering. We create innovative, customised solutions that reflect the expectations of even the most discerning investors.
How do structured funds work?
A structured fund is built from a combination of financial instruments that define its risk and return profile. Key components include:
- Underlying assets
Structured funds are linked to one or more underlying assets, such as stock indices, equities, bonds, or commodities. These assets influence the fund’s potential returns. - Derivatives
Structured funds incorporate derivative instruments, such as options or swaps, to shape the fund’s risk-return characteristics. For example, a put option may provide a level of capital protection, while a call option can offer upside participation in market growth. - Defined maturity
Most structured funds are issued for a fixed term (e.g. 3, 5, or 10 years). At maturity, the investor receives a payout based on the performance of the underlying assets and the predefined terms of the fund.
The advantages of structured funds
Structured funds offer a wide range of benefits that make them attractive to many investor profiles:
- Partial or full capital protection
Certain structured funds offer partial or full protection of the initial investment, regardless of market conditions. This allows investors to limit downside risk while still participating in growth opportunities. - Tailored objectives
Structured funds can be designed to pursue specific financial goals, from securing capital to generating regular income or capturing potential market gains. This flexibility makes them ideal for investors with precise needs. - Access to diversified assets
By incorporating a variety of assets such as global indices, commodities, or bonds, structured funds help diversify portfolios and reduce the risks associated with a single asset class. - Resilience in volatile markets
In uncertain environments, structured funds provide stable and predictable outcomes through built-in protection features and predefined performance scenarios. - Attractive risk-adjusted returns
Depending on the structure, these funds can offer competitive returns while maintaining controlled risk levels, making them suitable for both cautious investors and those targeting higher performance.
Who are structured funds designed for?
Structured funds are particularly suited to investors seeking a combination of security and return, as well as those with a medium- to long-term investment horizon. Typical profiles include:
- Cautious investors
Those looking to safeguard their capital while aiming for moderate returns may be drawn to funds that guarantee part or all of the initial investment. - Diversified investors
Structured funds offer access to a range of asset classes and market exposures, including less accessible opportunities like foreign indices or commodities. - Investors seeking tailored solutions
Structured funds can be tailored to specific requirements, whether adjusting to a particular risk tolerance or targeting defined performance objectives. - Market-aware investors
With their flexible mechanisms, structured funds allow investors to position their portfolio around anticipated trends such as economic recovery or interest rate stabilisation.
What are the risks of structured funds?
While structured funds offer clear advantages, investors should also be aware of potential risks:
- Product complexity
The mechanics of structured funds can be complex and may not be easily understood without guidance. Expert support is essential to fully grasp their structure and suitability. - Liquidity risk
Since most structured funds have a fixed term, redeeming capital before maturity can be challenging or unfavourable. - Dependence on underlying assets
If the underlying assets underperform, the returns may fall short of expectations, and in some cases, the payout may be limited or null.
Why choose Quintet for structured fund investments?
At Quintet Luxembourg, we recognise that every investor has unique expectations and financial objectives. Our expertise in structured funds is built on four key pillars:
- Tailored solutions
We co-create structured funds with our clients, designing strategies that reflect their goals through diversified assets and customised protection features. - Recognised expertise
Our team of asset management professionals continuously monitors the markets to identify the best opportunities and deliver high-performing solutions. - Transparent guidance
We guide our clients at every step, clearly outlining the benefits, risks, and potential returns of each structured fund. - Commitment to sustainability
At Quintet, we integrate ESG criteria into our investment strategies, ensuring that our structured funds align with environmental and social responsibility goals.
Structured funds: a high-value investment tool
Structured funds are a powerful solution for investors seeking a balance between return, diversification, and capital protection. Their flexibility and ability to be tailored to individual needs make them suitable for a wide range of investor profiles, from the most cautious to the most ambitious.
At Quintet Luxembourg, we combine deep expertise with a bespoke approach to create structured funds that reflect your ambitions. If you would like to explore these opportunities and integrate innovative solutions into your portfolio, contact our specialised advisors today.