Economy | 31 January, 2019

How do we benefit from falls in financial assets?

Sergio García Head of Third-Party Products

More and more customers, faced with financial market uncertainty, would be interested in investing in a product that can benefit from both rises and falls in prices of financial assets, like stock market indices or shares.

How to invest in capital protected structured products?

Structured products are interesting investment solutions that help us build an investment vehicle that exactly matches our needs from combinations of different financial assets (fixed income, equities, derivatives, etc.) Its flexibility allows us to choose the term of the investment, the underlying assets, the currency, and of course, the level of risk that we want to assume, even delimiting the capital guarantee. Learn with the financial formation of BBVA in Switzerland, how to invest in funds protecting capital.

At BBVA in Switzerland we can provide alternatives that meet this requirement, through structured products such as ‘Twin – Win’.

What does this product consist of?

A Twin Win product generically offers us the possibility of obtaining positive returns, whether the structured product’s underlying asset increases or decreases. Although, as with any structured product, there is a wide range of alternatives for personalising the product to meet the specific needs of each customer, the most common example is a product that pays us 100% of the rise in the underlying and also 100% of its fall, but in absolute value: i.e. with a positive return.

Using a simple example, if our underlying has fallen by 10% during the period defined in the product terms and conditions, the client would obtain a 10% return. If instead our underlying asset experiences a rise of 10%, the product would pay that yield at maturity. These products usually have maximum and minimum barriers set, which if reached by the underlying, would mean that the product did not accumulate any gain at maturity. In other words, if we set the barriers at +/- 20%, and the underlying asset at maturity has experienced a gain or loss higher or lower than that limit, the client would not receive any return. In addition, the issuer usually offers capital protection on these products, so that at maturity the customer’s capital will be reimbursed, irrespective of the performance of the product’s underlying asset.

This can be a very interesting solution for those who want to invest conservatively in the equity market, offering them a good alternative to try and get a positive return in face of the lack of clear direction currently being shown in the equity market.

If you have any further questions, please do not hesitate to contact your adviser before making a decision.