Capital protected products: A dead end

Key Points Market exposure with capital protection is an illusion Investors receive only a small portion of expected performance CPP investors are betting against history The Product You can’t blame the investors. Why wouldn’t they want to shield themselves from volatile equity markets with capital protected products (CPPs)? No wonder they’ve become very popular over the last decade. But like soap powder on a supermarket shelf, the range is large but the basic ingredients are much the same. First, the issuer guarantees to repay your investment at maturity, usually three to five years down the track. Second, your investment...

You can’t blame the investors. Why wouldn’t they want to shield themselves from volatile equity markets with capital protected products (CPPs)? No wonder they’ve become very popular over the last decade. But like soap powder on a supermarket shelf, the range is large but the basic ingredients are much the same.

First, the issuer guarantees to repay your investment at maturity, usually three to five years down the track.

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