Structured notes offer multiple advantages
Structured notes are financial instruments widely used by portfolio managers, advisors, or other executives due to the multiple advantages they offer.
Transparency
Structured notes are highly transparent instruments because, at the time of their issuance, the underlying assets that shape them and the objective of the investment strategy behind them are exposed.
Diversification
On the other hand, this financial instrument allows for a broad diversification since it can be composed of assets with different characteristics, such as stocks, bonds, commodities, real estate, etc. Also, structured notes can follow the behavior of a given index.
As the Corporate Finance Institute (CFI) explains, “they offer a cost-effective way to diversify by benchmarking or getting exposed to investments that were historically inaccessible.”
Accessibility
Each note has its respective ISIN/CUSIP code that facilitates its distribution. Investors can easily access the strategy repackaged in the structured note by purchasing the security on Euroclear through their brokerage accounts.
According to the financial institution Monex, “structured notes can allow investors to access international markets that otherwise might be out of reach.”
The five steps to issuing ETPs with FlexFunds
An ETP, which is an instrument similar to a note structured under specific criteria, can give you access to these advantages. You can issue your ETP with FlexFunds in just five steps:
Step 1: Customized study and design of the ETP
Because ETPs can be based on many assets listed on secondary and private markets, it is necessary to study each case and provide a tailor-made solution.
Step 2: Due diligence and signing of the engagement letter
After defining the product’s structure, the risk committee studies and evaluates the case. Then, progress is made with signing the engagement letter, the contract specifying the terms and conditions, and the scope of the functions to be performed by FlexFunds.
Step 3: ETP structuring and document review
During the process, it is essential to work closely with the client to guarantee the correct development of the necessary documentation that will shape the ETP. In this stage, the onboarding of the portfolio manager is carried out.
The structuring is completed once the essential documents of the investment vehicle, such as the Series Memorandum, the Constituting Instrument, and the Portfolio Management Agreement, have been drafted and reviewed.
Step 4: Issuance and listing of the ETP
At this point, your investment strategy is repackaged in an ETP. It is now necessary to proceed with its listing and generate an ISIN/CUSIP facilitating its distribution.
The securities are issued by the Irish Special Purpose Vehicle (SPV) set up for this objective and are backed by the investment strategy, which acts as collateral.
Step 5: ETP is ready for trading via Euroclear
The asset securitization process ends with the issuance and listing of the ETP. Now it is ready for distribution.
The strategy is available to investors because, as mentioned above, they only need to purchase the security via Euroclear using their brokerage accounts. This option is available through various custodians and private banking platforms.
If you want to know more about the benefits of structured notes or directly want to market one, do not hesitate to contact our team.
Sources:
- https://corporatefinanceinstitute.com/resources/capital-markets/exchange-traded-product-etp/
- https://blog.monex.com.mx/instrumentos-financieros/que-son-las-notas-estructuradas
