What’s Ahead:
- Structured Note Payoffs can potentially enhance market gains
- Uncapped Growth is a type of Structured Note Payoff that can multiply market gains without any limit to upside potential
- Investors seeking to amplify large positive return outcomes tend to appreciate this Note Payoff type
Market Exposure with Upside Enhancement
If you’re interested in investing with potentially enhanced upside for market gains, this brief explains how Uncapped Growth, one type of Structured Note payoff, can modify positive return outcomes.
But first, a couple basics:
- Structured Notes are like a hybrid between a stock and a bond. Although they are technically bonds, their market value typically derives from the return of a stock or index, called the Underlier.
- The Structured Note has performance terms that adjust the return of the Underlier to determine the Structured Note’s return. Those adjustments are commonly in the form of protection against negative returns and enhancement of positive returns.
What Differentiates Uncapped Growth Payoff Notes
Uncapped Growth Notes are a type of investment that lets you potentially earn positive returns if the Underlier has a positive return.
When the Underlier’s positive return is positive, Uncapped Growth notes amplify the Underlier’s positive return by a Participation Multiplier. An appealing element of the Participation Multiplier is that it can be above 100%, or 1x, which enhances the Structured Note’s return to be higher than the Underlier’s return.
The table below shows how Uncapped Growth Notes modify the Underlier’s return:
| Underlier Return | Note Return |
|---|---|
| Above 0% | Underlier Return x Participation Multiplier |
The following chart can be used to show how Uncapped Growth Notes may adjust the Underlier return across different Participation Multiplier types: Enhanced (greater than 1x), Point-to-Point (exactly 1x), and Partial (less than 1x).
Uncapped Growth may be a good option if you want to increase an asset’s upside return potential. It’s most effective in moderate to significantly positive scenarios. For more information on choosing note types, we recommend reading our “Choosing a Payoff Type” guide.
By understanding how Uncapped Growth Notes work, you can potentially increase returns in positive market conditions, and produce a greater return on your investment than holding the Underlier in the traditional way.
Please see our other important disclosures.
