Market-Linked
Notes.
Innovative financial instruments designed to enhance portfolio diversification while potentially limiting downside exposure.
Understanding Structured Notes.
Market-Linked Notes (MLNs) are hybrid securities that combine features of corporate bonds with the performance potential of equity markets. They are designed for investors seeking exposure to various asset classes with predefined risk parameters.
How They Work
Many MLNs offer full or partial principal protection; however, some do not have any downside protection. The amount of principal protection depends on the structure, and is stated in the product's term sheet.
Key Structure Types
- Principal Protected: 100% of initial investment returned at maturity, subject to issuer credit risk.
- Buffer Notes: Protect against the first 10-30% of market decline.
- Growth Notes: Enhanced participation (e.g., 2x or 3x) in market upside up to a cap.
Why Invest?
Enhanced Return Potential
Potential for higher returns than traditional deposits and savings accounts while balancing risk exposure.
Defined Capital Protection
Many MLNs offer full or partial principal protection, with the specific buffer amount clearly stated in the product's term sheet.
Asset Diversification
Access to a wide range of asset classes and global markets that are otherwise difficult for individual investors to access directly.
Strategic Flexibility
Notes available for both income and growth investors, including eligibility for many retirement accounts (IRAs).
* Diversification does not ensure a profit or protect against loss in a declining market. Asset allocation and diversification strategies cannot guarantee investment returns or eliminate the risk of loss.
Who Are MLNs For?
Suitable for buy-and-hold investors seeking defined outcomes and portfolio diversification.
Retirement Planning
For investors who want a defined payoff profile and can accept the tradeoffs.
MLNs may be considered by long-term investors who are comfortable holding to maturity, understand that returns can be capped or conditional, and accept issuer credit risk and limited liquidity. They are generally intended for investors who can tolerate the possibility of receiving less than their original investment and who do not need near-term access to the funds.
Defined-Outcome Investing
For investors seeking a specific payoff profile within a diversified plan.
MLNs may be considered by investors who want exposure with pre-set terms (such as capped upside, buffers, or contingent coupons) and who understand how those terms affect returns. Investors should be able to hold to maturity, accept limited liquidity, and tolerate the risk of loss, including losing principal. MLNs are not appropriate for all investors.
Wealth Enhancement
For informed investors seeking risk-managed yield or diversification—without guaranteed results.
MLNs may be used by investors who understand structured-note mechanics and are seeking a specific exposure or income feature that may not be available in simpler products. Investors should be comfortable with limited upside, potential downside, early-redemption features, and secondary-market uncertainty, and should not view MLNs as principal-protected unless the offering documents explicitly state so.
Risk Factors & Disclosures
Principal and Performance Risk
MLN principal is guaranteed by the issuer only if held to maturity. Returns may differ from underlying asset performance due to structural features like caps and participation rates.
Liquidity Risk
Early redemption fees may apply and there is no guarantee of a secondary market. These notes are designed for buy-and-hold investors.
Credit Risk
Notes are subject to the issuer's credit risk. If the issuer cannot meet its obligations, you may not receive expected returns or principal.
Additional Disclosures
Market-Linked Notes are not FDIC-insured and principal is not guaranteed for all Notes. Returns may not necessarily reflect the full performance of the Reference Securities or index and may be lower than a direct investment.
Tax Treatment: MLN returns are frequently considered interest income and taxed at the holder's ordinary income rate but may be subject to capital gains tax. Tax treatment varies based on product terms. For complete tax advice, consult your tax advisor.