Introduction
Investment portfolios can be specific to geographical domains. This is because investors set objectives for building their investment plans. Capital protection or principal protection plans are of utmost importance for some investors. They would not mind paying that extra premium to go for plans that offer complete protection on their capital investments.
On the other hand, you have geographical domains wherein investors prefer equity to get that adrenaline rush of seeing their stocks rise or plummet. These investors want to see their portfolios grow and are not worried about the daily nitty gritty.
On this note, let us deep dive into structured products in the Middle East that perfectly go with what investors in this region typically want or expect
Major types of structured products that cater to the Middle East
Let us look into the main types of Structured Products Middle East, that investors would like to foray into. Helping you through the consolidated list:
Islamic Structured Products
Islamic Structured Products are financial instruments that strictly comply with Islamic financial laws. In other words, these products must strictly comply with financial laws as stated in the Shariah Principles. Terms like Principal money, Rate of Returns, maturity period, and other investment-related jargon are represented in an Islamic context.
Capital Protected Products
Investors in the Middle East prefer choosing products that emphasize capital protection. This is the money an investor puts in, at the initial stage of the offering. They choose investment products that guarantee the return of the principal amount with potential returns linked to underlying assets or stocks.
Equity-linked Notes
These are structured notes that comprise debt instruments camouflaged with equity, stocks, or currencies. The returns of investment are linked to the underlying assets these notes are linked with. The equity-linked notes can be linked to a specific stock or a basket of stocks.
These are investment options that can be customized to suit investor’s individual needs or preferences. The notes leverage capital protection and help investors earn better returns through the equity market.
Commodity-Linked Investments
Given the region’s dominance in oil and gold, investors across the Middle East like investing in commodity-linked investment plans. Several investment schemes with commodity-linked plans are tailor-made to suit independent investors’ risk appetite or income generation objectives.
Real-Estate Equities
As you all know, regions like Abu Dhabi, Dubai, Qatar, and Saudi Arabia are becoming hot hubs for real estate. Therefore, investors in the Middle East like to invest their money in property-related securities.
Real estate equities or notes linked to the same appreciate as properties appreciate. So, real estate equities can gather momentum and garner interest amongst investors residing in the Middle East. These asset classes help mitigate financial crises on a deeper level.
Currency-Linked Structured Products
As you already know, regions surrounding the Middle East face thorough fluctuations in currency values. The volatility of currency prices happens as the UAE regions rely on income through their oil reserves.
Investors therefore like investing
in structured notes linked to currency values as most pliers have access to US Dollars or Euros. Currency hedging therefore is a profitable venture for investors in the Middle East. Corporate Index bonds are linked to currencies that offer high-value returns on investments.
Structured Notes
Principal Protection notes and ELNs are structured notes that offer investors a range of diversification benefits concerning building their investment portfolios. Plus, investors can link the notes with currencies or commodities of their choice.
The degree of flexibility or exposure they get from global commodities isn’t feasible locally. Therefore, high-net-worth investors prefer stakes in global investment products or commodities.
Private banking firms collate with EMEA Finance companies to create securitization bonds that are sustainable for the client’s portfolio.
How Do you Choose Investment Firms?
Here are tips for choosing Investment firms the right way. Let us have a look into the same:
Choose a partner that offers personalized solutions
You must choose a partner that offers you personalized and customized solutions that seamlessly take care of your investment needs. The investment partner must guide you into what types of investments are good for you and what aren’t. When you have a firm that offers you personalized solutions based on your risk-tolerance ratio, then you may go in with the investing partner.
Equipped with well-experienced teams and infrastructure
You must look for a firm that is well-experienced in the field of handling investment portfolios. You can request the firm to showcase their sample work so that you know what kind of testimonials their previously worked clients have provided. The investment company must also have the right infrastructure to guide investors well.
Adaptability
You must look for investment firms that provide adaptability while you look for investing options. They must provide you with a solution that works well in different market conditions. The commonly known trends are Bearish, bullish, and flat curve market trends. This way, the investor gets the adaptability to play around with his investment under different market conditions.
As you have equity-linked notes or principal-protected structured notes, the returns of investment are directly proportional to the performance of the underlying stocks or equities the notes are linked with.
The investment firm you choose must therefore provide investors with the adaptability to deal with dynamic market conditions and trends.
Risk monitoring
The investment firm you choose must comprise teams that perform risk monitoring on a close basis. You need investment brokers or trading agents who pay attention to detail when it comes to monitoring the market movements or trends across your investment plans.
Experienced wealth or investment managers also help you manage risk monitoring and this must surpass superlative standards after all. The risk management team therefore must be a robust one for you to green-check the investment company you may be zeroing in on.
Must be a recognized leader in the market
You must look for an investment broking firm that has decades of experience in dealing with customers through various investment plans. The firm must be a market leader and must be a recognized one.
It must have impressive client testimonials and great partnerships with financial firms or with giant conglomerates. It is then you feel that you have reached the right hub after all.
Features of a Good Investment Plan
Let us look at what features you need to make your structured finance portfolio look great. Helping you through with the same:
Must be highly customizable
A good investment plan must be highly customizable. The investment firm must consider the income-earning potential of its customer base. The plan must also take into the risk tolerance ability the customer can consummate. A good investment plan must take care of the above factors before you recommend such a plan to the customer.
Liquidity
A good investment must have good liquidity to make the option an attractive one for investors. As an investor, you must be given an option to at least partially withdraw your funds during a contingency situation. Or, you may be provided with an option to bid for or sell your securities in the open market even if it means losing a part of capital investment.
Creditworthiness of the Issuing company
You must look if the issuing company has years of experience and carry expertise in handling diversified investment portfolios of retail or institutional investors. Therefore, the investor looks for the creditworthiness of the issuing firm when he/she wants to make an investment plan with the firm.
Does the investment plan offer you tax-saving benefits?
A good investment plan must come to you with attractive tax-saving benefits after all. This way, the investor can leverage their funds into wealth accumulation or utilize the funds for meeting personal objectives connected with the income earned.
Diversification
A good investment plan must offer diversification when it comes to curating wealth baskets for customers. You must allow customization on different classes of investment products.
You can link notes to stocks, securities, debentures, currencies, and other forms of financial instruments. This way, investors get a diversified investment portfolio according to their income generation objectives.
Key Takeaways
You do find structured products that are primarily catered to markets in the Middle East. The investment niche here is characterized by the presence of broader financial markets and investors specify their independent preferences after micro-grouping options to suit their wealth-generation objectives.
Traditional Financial conglomerates that operate in various regions of the UAE structure financial products after complying with Islamic laws. The laws apply predominantly for income or wealth generation opportunities.
Generally, investment firms look at the risk tolerance of each investor. After carefully evaluating the availability of dispensable income at the hands of the investors, the investor’s risk tolerance ratios are arrived at. It is then the broking or investment firms suggest a range of products that can suit the investor.
To curate an optimal investment plan, risk factors, like credit risk, market risks, and regulatory requirements are looked at by firms in depth. Therefore, it is always ideal that the investor reads through the terms and conditions of the offer document before they plan to sign on the dotted lines.
In a nutshell, market participants combine innovation and sustainability to create investments with diligence and therefore become winners.
