Structured Funds

AAA

DEFINITION of 'Structured Funds'

A fund that combines both equity and fixed-income products to provide investors with a degree of both capital protection and capital appreciation. These funds use fixed-income securities to give the fund capital protection through principal repayment along with the added gain of interest payments. The fund uses options, futures and other derivatives, which are often based on market indexes, to provide exposure to capital appreciation.

INVESTOPEDIA EXPLAINS 'Structured Funds'

These products are attractive to investors looking for downside protection who would also like to see gains from upside movements in the markets. Depending on the fund, the exact products and guarantees will vary.

For example, if an S&P 500 structured fund protects 80% of its principal, this means that it will invest 80% of its funds in fixed-income products with little chance of falling below the principal amount. The rest of the fund is invested in derivatives that are exposed to the S&P 500 index. Investor will gain as the S&P 500 advances and will lose as it falls, but the fund won't fall below 80% of its starting value.

RELATED TERMS
  1. Hybrid Security

    A security that combines two or more different financial instruments. ...
  2. Option

    A financial derivative that represents a contract sold by one ...
  3. Derivative

    A security whose price is dependent upon or derived from one ...
  4. Structured Note

    A debt obligation that also contains an embedded derivative component ...
  5. Futures

    A financial contract obligating the buyer to purchase an asset ...
  6. Standard & Poor's 500 Index - S&P ...

    An index of 500 stocks chosen for market size, liquidity and ...
Related Articles
  1. Options & Futures

    Are Structured Retail Products Too Good To Be True?

    Spot a rotten investment before you get seduced by its sweet promise of profit.
  2. Options & Futures

    These Financial Products Are Too Complex For The Average Joe

    Structured financial products are so elaborate that investors are unable to assess costs and risk.
  3. Options & Futures

    Options and Roth IRAs: Do's and Don'ts

    A breakdown of the do's and don'ts of trading options in a Roth IRA.
  4. Options & Futures

    5 Secrets You Didn't Know About Roth IRAs

    Between its generous tax benefits at retirement and no required minimum distributions, a Roth IRA is well worth considering if you're eligible to have one.
  5. Forex Strategies

    The 10 Riskiest Investments

    Investors seeking high returns must also be prepared for high risk. Here are ten of the riskiest investments available.
  6. Options & Futures

    Trade Covered Calls On High Dividend Paying Stocks

    We explain the risks, rewards, timing, and profit and loss considerations for covered calls with dividend stocks.
  7. Mutual Funds & ETFs

    How To Apply Technical Indicators To Mutual Funds

    Mutual funds do not readily lend themselves to technical analysis, but investors can use common indicators to evaluate mutual funds as easily as stocks.
  8. Options & Futures

    Was Buffet Right about Derivatives as WMDs?

    Why Warren Buffet described derivatives as weapons of mass destruction, and when can they be helpful or harmful?
  9. Options & Futures

    Examples Of Exchange-Traded Derivatives

    We look at some of the most common exchange-traded derivatives.
  10. Options & Futures

    Advantages Of Trading Futures Over Stocks

    We look at the top eight advantages of trading futures over stocks.

You May Also Like

Hot Definitions
  1. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  2. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  3. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  4. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  5. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  6. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
Trading Center