Capital Protection in Structured Products – The Fine Print Behind the Promise

If structured products were a buffet, capital protection would be the bread rolls. Comforting, familiar, and usually the first thing people reach for – but not quite the whole meal.

In our earlier guide to structured products, we explained how these made-to-measure investments combine a steady, sensible bond with a more adventurous derivative to deliver a specific outcome. Capital protection is the bit that says, “Don’t worry – whatever the market does, you’ll get your money back at the end.”

Reassuring, yes. Foolproof? Not quite. Capital protection isn’t a magical safety net spun by the financial gods. It’s a promise written into the product’s terms – and it only works if the issuer is still solvent and the structure does exactly what it’s supposed to. Unlike statutory schemes such as the UK’s Financial Services Compensation Scheme, there’s no public rescue here if things go wrong. If the issuer runs into trouble, the protection will politely exit stage left along with them.