Providers of ‘capital guaranteed’ and ‘capital protected’ structured products usually promise to at least repay your original investment at the end of a stated period. However, the nature of the protection varies, and some products have clauses and performance hurdles that may even lead to losing your capital.
What are capital-guaranteed and capital-protected products?
Structured products promoted as having capital guarantee or capital protection typically combine a ‘safe’ and a ‘risky’ asset into one product structure.
For example, a safe asset, such as a bond, enables the issuer to promise the return at maturity of at least some or all of the investor’s original investment. This feature is promoted as ‘capital protection, or sometimes the ‘capital guarantee.’