Structured Notes

Want to be able to take advantage of promising financial market trends when the time is right but your start-up capital is limited? Opt for a Structured Note. With this financial instrument you can target the potentially attractive returns of high-risk asset categories, such as equities or commodities, without investing in them directly.

What is a Structured Note?

The term “Structured Note" covers a wide range of fixed-term financial instruments. Each of them has a different yield mechanism and underlying assets (basket of shares, stock market indices, commodities, etc.) and their yield takes different forms (fixed and/or variable coupons, capital gains on maturity). In certain cases, they are repaid at full nominal value on redemption.

Advantages

  • A wide range of packages that enables you to choose an investment suited to your profile and investment objectives.
  • Possibility of targeting a high potential return without investing directly in high-risk asset categories, in some cases combined with the right to repayment in full of the capital invested.
  • An easy way to access complex financial markets, such as the commodities or emerging markets, even with limited start-up capital. 

 

List of bond issues open for subscription (FR)

 

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The wide variety of Structured Notes offered by BNP Paribas Fortis means that there is a package to suit every investor profile. There are packages that repay capital at full nominal value at maturity to meet the expectations of cautious investors. More aggressive investors will prefer more risky packages, such as Reverse Convertible Notes on equities or stock market indices, that target a potentially higher return.

 

The principal risks with Structured Notes are the following:

  • Risk of no return: if the yield mechanism does not provide for a minimum return, there may be no return on maturity if the trend for the underlying asset is negative.
  • Capital risk: if the Structured Note does not provide for full capital reimbursement, a negative trend for the underlying asset can result in partial or total loss of the capital.
  • Insolvency risk: this is closely linked to the quality of the issuer. Investors can get an idea of the quality from the ratings attributed by rating agencies. As a Structured Notes issuer, BNP Paribas Fortis has an “investment grade” rating(Standard & Poor's ratings going from AAA to BBB- and Moody's from Aaa to Baa).
  • Liquidity risk: this depends on the existence and operation of a secondary market for the Structured Note. Basically, the higher the total amount of the issue, the higher the volume of transactions is likely to be, which reduces the counterparty risk. Since the Structured Notes market can be limited and therefore lack liquidity, investors may have to hold on to their investments until maturity.
  • Exchange riskwith Structured Notes issued in foreign currencies. Exchange risk means that at maturity, the investor may receive an amount in euros that is less than the initial euro investment. 
  • Other risks: the price of a Structured Note varies in line with overall interest-rate fluctuations, but also with the trend for the underlying asset and market volatility.

Primary market

When a new Structured Note is issued, the investor may subscribe to it on the primary market at a set price for a set period of time, the so-called “subscription period”.

Take a look at our primary market offering (pdf).

 

Secondary market

Structured Notes are traded on the stock market. To purchase a Structured Note after the subscription period has expired or to sell it before it matures, the investor must go through the secondary market. The price at which it can be bought or sold then depends on the price at which the Structured Note is quoted, the potential return and the brokerage costs. The quoted price for a Structured Note fluctuates on the basis of the residual maturity, the issuer's financial health, the trend for the underlying security, market volatility and changes in interest rates.

 

With each new issue promoted by BNP Paribas Fortis, the Prospectus and sales documentation are made available to investors so that they can assess the risks and make an informed decision on whether or not to subscribe.

List of bond issues open to subscription (FR)Information leaflet on Financial Instruments (pdf)Rates and charges for securities transactions (pdf)


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