Participation products participate in the price performance of the underlying assets and offer full upside potential with full downside protection.
Participation products are legally secured debentures.
They are commonly marketed under the name of 'certificates' or 'notes'.
Derivatives contracts and bonds are used for both the principal and return
A. Secured debt securities of the issuer
Created by combining traditional investments with financial derivatives
C. Entitled to share the issuer's profits
Equity securities that give higher return as compared to traditional products
Stock broking houses
Are secured debt instruments
Carry lower degrees of investment risk
Share in the profits of the participating funds
Typically offer unlimited upside potential with no downside protection
Are highly liquid assets
Carry low investment risk
Are simple products to understand
Provide access to investment markets that are otherwise closed to them
Are equity securities
Are also known as hybrid products
Carry singled-faceted, non-complex investment risks
Typically combine traditional investments with property investments
Have the ability to offer customized exposure
Are useful as a complement to traditional investments
Are accessible to retail investors in the same ways that other investment products are
All of the above
Capable of generating high returns
Not considered as investment products
Included in the Deposit Insurance Scheme in Singapore
Usually arranged such that the capital is guaranteed by the bank
All of the above
Credit Risk of the issuer
High returns low risk
full upside potential
A fixed income instrument for the principal component
Issued by a bank
Issued by an insurance company
A collective investment scheme
Issued by fund managers
Not investment products
Covered by Deposit Insurance Scheme in Singapore
They are unsecured debt securities of the issuer.
They have equity-like structures and participate in the profits of the issuer.
They are hybrid products.
They are more complex products.
Primary risk to principal
Primary risk to return
Secondary risk to upside potential
Secondary risk to downside protection
Coupon Bearing Bonds
Real Estate Investment Trusts
Investor has full upside potential
Use a Put option
Tracks the performance of underlying asset
Investor has limited downside protection
Pricing on the structure is reasonable
Anticipated market view is correct
Able to attract more than expected fund size
Strategy or structure to capture market view is appropriate
Issuer is likely to exercise his right to "call" when the interested rate has declined
They expose investors to high risks and should be avoided at all times
Cheaper than straight, non-callable securities and pay higher coupons
May be redeemed before maturity
The principal is guaranteed.
Provide stability in returns.
They have fixed maturity dates.
They have upside participation.
It is only distributed by the bank channel.
The main disclosure document is the factsheet.
It has low administration cost.
It has a trust structure.
Interest Rate Risk
Bonus certificate may be knocked-out only at maturity.
Bonus certificate's investor bears full downside of the underlying asset.
Airbag certificate has limited upside potential.
Airbag certificate was created to reduce the impact of price decline.