Table of contents
- What is a structured investment?
- Why should I invest in structured investments?
- What should I consider before investing in a structured investment?
- What are the different underlying (i.e. asset class or type) used in structured investments?
- Are structured investments eligible for protection by the Perbadanan Insurans Deposit Malaysia (PIDM)?
- Can I invest in structured investments?
- Can I invest in Floating Rates Negotiable Instrument of Deposits (FRNID)/ Floating Rates Islamic Negotiable Instruments (FRINI)?
- What is the minimum amount I need to invest?
- What are the risks involved when investing in structured investment products?
- Is my structured investment principal guaranteed?
- What are the charges/ fees I have to pay?
- Are there any penalties or charges if I redeem my structured investment prior to the maturity date?
- What documents will I receive from the bank if I invest in structured investments?
- What is the pre-investment cooling-off period?
- Is there a post-sale cooling-off period?
- Will the Bank provide me with regular statements of my investment?
- How are these structured investments regulated by local authorities?
What is a structured investment?
Structured investments can come in many forms, but they're typically funded investment products that are a combination of a deposit (or other similar fixed income instruments, such as a bond, debt security or negotiable instrument of deposit) and an embedded derivative element, which gives a risk exposure to a class of assets, aimed at delivering the enhanced return (relative to ordinary time deposit products) for that structured investment.
The return on investment is dependent upon the performance of the chosen asset class, such as equity indices, equities, interest rates, fixed-income instruments, foreign exchange rates, commodities, or combinations of these. If the asset class performs in the way expected under the terms of the embedded derivative, it will deliver a payoff that brings about the enhanced return intended for that structured investment.
Why should I invest in structured investments?
Investing in structured investments gives investors the potential opportunity to earn a higher return, as explained above. Structured investments come with varying risk levels and can be principal guaranteed (where the investment is designed to prevent the investor from losing any principal amount invested) as well as non-principal guaranteed (where the investment is exposed to higher risk in exchange for enhanced returns). Inherently, an investor could also lose part or even all of the principal amount invested if the investment does not perform. In some structures, the design may include loss mitigation barriers to cap the potential loss of principal to strike a balance between risk and potential higher returns – these are usually termed as structured investments that are "partially principal guaranteed" by HSBC Malaysia Berhad.
What should I consider before investing in a structured investment?
You should consider the suitability of the particular structured investment based on your financial goals, risk appetite and liquidity needs. When choosing a structured investment, you'll need to consider the following:
- Liquidity - Consider your liquidity needs as your money will be tied up for a period of time and early withdrawal (if permitted, as some may not even permit an early withdrawal, or only if subject to conditions) may result in the loss of part of your return and/or principal. Make sure you have no urgent need for the funds you invested for the investment tenor and have sufficient liquidity on hand in your portfolio to account for any emergencies or situations that might arise.
- Risks - Structured investments are riskier than normal fixed deposits. You should understand the risks involved and what will happen in a worst case scenario. Make sure you're comfortable with the risk involved and if you aren't certain, seek help from your Personal Banker/Relationship Manager to better understand the risks involved. However, your Personal Banker/Relationship Manager is not there to advise you about any specific investment decision; whether you should enter into any particular structured investment must ultimately be your own decision that you arrive at with the help of your own independent financial advisors, if you feel it's necessary.
- Returns- As structured investments are tied to the performance of the underlying asset/asset class such as equities indices, equities, interest rates, fixed-income instruments, foreign exchange rate, exchange traded funds (ETFs), commodities or a combination of these, you should understand how the performance of these instruments affects the return on your investment. You should also be aware that past performance or back-testing is not necessarily indicative of future performance.
What are the different underlying (i.e. asset class or type) used in structured investments?
HSBC offers structured investments with underlyings from different asset classes such as equity indices, equities, interest rates, foreign exchange rates, ETFs, commodities etc.
Are structured investments eligible for protection by the Perbadanan Insurans Deposit Malaysia (PIDM)?
Not all structured investments are eligible for PIDM protection. You should refer to the Investment Agreement for details on the eligibility for PIDM protection.
Can I invest in structured investments?
Structured investments can only be offered to a "Sophisticated Investor" as defined by Schedule 6 paragraph 8 or paragraph 16, read together with Section 229 of the Capital Markets and Services Act 2007 (CMSA). To qualify as a Sophisticated Investor, you must have at least one of the following at the Trade Date:
- total net personal assets, not including the value of your primary residence, of more than 3 million ringgit (RM3,000,000) or its equivalent in foreign currencies; OR
- total net joint assets with your spouse, not including the value of your primary residence, of more than 3 million ringgit (RM3,000,000) or its equivalent in foreign currencies; OR
- a gross annual income exceeding RM300,000 or its equivalent in foreign currencies in the last 12 months; OR
- a gross annual income jointly with your spouse exceeding RM400,000 or its equivalent in foreign currencies in the last 12 months
- a net personal investment portfolio in any capital market products, exceeding 1 million ringgit (RM1,000,000) or its equivalent in foreign currencies; OR
- a net joint investment portfolio with your spouse in any capital market products, exceeding 1 million ringgit (RM1,000,000) or its equivalent in foreign currencies; OR
- the position of either a Chief Executive Officer or a Director sitting on the board of any such entity referred to in paragraphs 3, 4, 5, 6 and 7 of Schedule 6 of the CMSA
Selling restrictions/tradability - not intended for distribution in the United States of America and Canada or for sales to US citizens and residents (which, for purposes of this investment, shall include US taxpayers) and Canadian citizens and residents.
Structured investments are also (i) non-tradeable/non-assignable and (ii) non-chargeable by the investor, except to the bank itself. Any purported third-party rights sought to be conferred by the investor by agreement or transfer without the prior concurrence of the bank of any kind shall not be recognised. Investments in the form of FRNID/FRINI will have different transferability characteristics from the aforesaid, but will also have other conditions related thereto before a transfer can be effected.
Can I invest in Floating Rates Negotiable Instrument of Deposits (FRNID)/ Floating Rates Islamic Negotiable Instruments (FRINI)?
There is no minimum net worth requirement for investment in FRNID/ FRINI. However, you must not be a US citizen and/or resident (which, for purposes of this investment, shall include US taxpayers) and/or a Canadian citizen and resident.
What is the minimum amount I need to invest?
The minimum investment amount for structured investments is RM50,000 and thereafter in multiples of RM1,000. The minimum investment amount for FRNID/ FRINI is RM65,000 and thereafter in multiples of RM1,000.
What are the risks involved when investing in structured investment products?
There are different risks associated with structured investment. These include principal risk, early redemption by customer risk, credit risk, legal risk, liquidity risk, early call risk, return risk, operational risk, early termination/redemption by the bank risk, options risk, settlement risk, tax risk, inflation risk, force majeure event risk, counterparty risk, reinvestment risk, compound of risk, interbank rates risk, market risk, market disruption risk and adjustment/substitution risk.
You're advised to read the Investment Agreement and other documents for detailed descriptions of the risks. You're also advised to carefully consider all risk factors before making any investment decision.
Is my structured investment principal guaranteed?
There are 2 categories of structured investments: non-principal guaranteed and 100% principal guaranteed. If you invest in a non-principal guaranteed investment, you may suffer a loss or partial loss of your principal. If you invest in a 100% principal guaranteed investment, the principal will be guaranteed if you hold the investment till its maturity, regardless of the performance of the underlying.
What are the charges/ fees I have to pay?
There are no charges or fees for structured investments.
Are there any penalties or charges if I redeem my structured investment prior to the maturity date?
Any early redemption of the structured investment prior to the maturity date will be at a buyback price that will be quoted by the bank and may result in a partial loss of the principal amount invested. The actual amount that you will be paid depends on the market value of the investment at the time of early redemption, adjusted for the bank’s unwinding costs, if any.
What documents will I receive from the bank if I invest in structured investments?
You'll be given an Investment Agreement, Product Highlight Sheet or Product Disclosure Sheet and Risk Disclosure Statement.
What is the pre-investment cooling-off period?
You're allowed to terminate the contract and obtain a refund of the monies paid within 3 Kuala Lumpur banking days after signing the Investment Agreement or upon the trade date being reached, whichever is earlier.
Is there a post-sale cooling-off period?
There is no post sale cooling-off period. If the contract is terminated after the pre- investment cooling-off period, it will be regarded as an early redemption.
Will the Bank provide me with regular statements of my investment?
An annual investment performance report will be sent to you if the structured investment tenor is longer than 1 year. The mark-to-market value will also be provided in your monthly statement for your reference and you may also access your investment portfolio via HBSC online banking under the 'Wealth Dashboard' section.
How are these structured investments regulated by local authorities?
Structured investments are regulated in Malaysia by the Securities Commission and Bank Negara Malaysia.