In today’s financial landscape, investment certificates emerge as increasingly relevant instruments for building efficient and personalised portfolios. This guide provides the fundamental information to understand how they work and their potential.
What are investment certificates
Certificates are financial instruments issued by banking institutions that allow investment in financial markets with predefined and often advantageous characteristics compared to direct investment. These are structured products that combine different financial components to offer customised risk-return profiles.
Unlike direct purchase of shares or bonds, certificates allow you to:
- Define possible return scenarios in advance
- Protect capital partially or totally
- Receive coupon flows even in sideways or moderately negative markets
- Diversify across baskets of securities with a single instrument
Structure and operation
An investment certificate is based on fundamental elements that determine its behaviour:
The underlying
Can be a single share, a basket of securities, a market index or a commodity. The underlying’s performance determines the certificate’s behaviour according to predefined rules.
The barrier
Represents the capital protection level. As long as the underlying doesn’t fall below this level, the invested capital is protected at maturity. Barriers typically range between 50% and 75% of the initial value.
The coupons
Many certificates provide periodic coupon payments (monthly, quarterly, semi-annual or annual). These can be unconditional or linked to the underlying exceeding certain levels.
The maturity
Each certificate has a predefined duration, generally between 1 and 5 years. At maturity, the investor receives repayment according to the certificate’s conditions.
Main types
Capital protected certificates
Guarantee capital return at maturity, regardless of the underlying’s performance. Ideal for prudent investors who don’t want to risk losses.
Conditionally capital protected certificates
Protect capital only if the barrier isn’t breached. Offer higher returns compared to total protection.
Coupon certificates
Pay periodic flows to investors, particularly appreciated in low interest rate environments to generate recurring income.
Participation certificates
Replicate the underlying’s performance, allowing investment in otherwise difficult-to-access markets.
Advantages of using certificates
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Customisation
Structures exist for every risk profile and investment objective
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Tax efficiency
Capital gains are taxed at 26% as miscellaneous income
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Diversification
A single certificate can provide exposure to baskets of securities
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Liquidity
Listed on regulated markets and can be sold before maturity
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Transparency
Operating rules are clearly defined in the prospectus
How to select a certificate
Choosing the right certificate requires analysis of several factors:
- Define the objective: Capital protection, income generation, participation in market upside
- Evaluate the underlying: Analyse the prospects of the security or index on which the certificate is built
- Consider the time horizon: Align the certificate’s maturity with your investment objectives
- Analyse the risk-return ratio: Compare potential return with the level of risk assumed
- Verify the issuer’s solidity: Choose certificates issued by reliable financial institutions
Where to find the best opportunities
The certificate market is vast and constantly evolving. To navigate effectively and not miss the most interesting opportunities, it’s essential to have access to updated information and professional analysis.
Don’t settle for standard products
Design unique certificates that meet your exact investment needs. Our team of experts guides you through every step.
