Do you like the idea of Structured Notes, but struggle with getting started?

In the simplest of terms, this guide helps demonstrate a couple ways advisors are using Structured Notes to meet modern portfolio design challenges.

Our emphasis here focuses on ways to immediately implement notes. For a basic introduction to Structured Notes, we encourage you to check out our Structured Notes 101 series or our growing library of video content. For those who are ready for a deeper dive, our Asset Allocation Framework is a must-have for understanding how Notes fit in portfolio management.

Positioning for Predictability: Getting Started with Digital Notes

For advisors looking for a relatively simple structure, Digital Notes might be worth a look.

They’re popular for their relatively straightforward payoff profile, which looks to take advantage of volatility to produce impressive returns. In short, a Digital Note pays a fixed return, generally double digits, with the added benefit of downside protection. WealthManagements.com’s 2025 Outlook featured some short research if you want to learn more. 

Advisors like Digitals for their basic structure, which offers a compelling return with protection, and because they are relatively simple to explain to clients. 

To illustrate their potential, we’ll use the Digital Note highlighted in Figure 1.

Figure 1

This Note has an indicative yield of nearly 17.28% and is linked to the worst performing of two underliers, the S&P 500 Index (SPX) and the Russell 2000 Index (RUT). Both of these are core holdings, generally held long term in most portfolios. The Note matures in two years and features a 25% soft barrier, meaning principal is protected against the first 25% of any potential drawdown for the worst-performing underlier, at maturity. The digital coupon is contingent and pays out as long as neither of the underliers’ price returns have declined by 25% of its initial level at maturity.

To further help analysis of this Note, Halo’s new analytics engine, Aura, can assist. With Aura, Halo users can analyze Structured Notes, including a before-and-after comparison of a portfolio with and without Notes. 

To keep this portfolio analysis straightforward, we begin with a simple 60/40 stock/bond mix and reallocate 20% to the Note in Figure 1. This is funded by reducing exposure to U.S. large-cap growth and large-cap value by 10% each. Figure 2 highlights these changes, including a snapshot of the reporting that Halo users have access to (client-friendly, retail versions are currently under FINRA review).

Figure 2

From Figure 3, we see that the addition of the Note has the potential to boost median expected return, while lowering standard deviation. This results in an improvement in the Sharpe ratio, as well as notable improvements in negative return frequencies. 

Figure 3

Digging deeper, the histogram in Figure 4 details the range of portfolio outcomes when this Digital Note is included in the portfolio and when it’s not. Simple annotations help illustrate how the original allocation compares to an asset mix featuring a 20% allocation to this Note. 

Figure 4

When a Note is included in the portfolio, Point 1 highlights a significant reduction in outcomes when losses are in the 0% to 15% range (hence, the 15% downside barrier). This protection comes at a cost, however. We see this in Point 2, which shows that some upside potential is sacrificed to add downside protection. Finally, at Point 3, we see that the projected return distribution exhibits a higher peak for the portfolio with the Note. This means a higher percentage of possible portfolio outcomes is more highly concentrated around the mean or average when using Notes, compared to not using Notes in this analysis.

The overall effect translates to what we believe is a more predictable or smoother investment experience. From this simple analysis, we see that the Digital Note used in this analysis has the potential to produce a meaningful impact on a portfolio, producing a more steady return stream, while cushioning against market drawdowns.

Supercharging Income

For those looking for more immediate cash flow, an Income Note could make an interesting alternative to the Digital Note used above. Because an Income Note’s coupon or income profile can be customized (i.e., monthly coupons, quarterly, etc.), advisors like them for matching income needs or other liabilities.

Extending the same analysis above, Figure 5 details indicative terms and pricing for a 24-month Income Note featuring a worst-of structure with three underliers, the S&P 500 Index (SPX), the Russell 2000 Index (RUT), and the Eurostoxx 50 (SX5E). In this example, coupons are paid quarterly and contingent on an underlier not dipping below 20% of any initial price level. In this example, more downside principal protection is added, pushing the soft barrier to 20% of the initial level at issuance.

Figure 5

As of early August 2025, we see that a Note with these attributes could yield about 12.48% annually. 

When added to Aura, this Note once again demonstrates the potential to improve a 60/40 stock/bond portfolio. Figure 6 quantitatively illustrates this using common metrics. The histogram for this simulation expresses a similar outcome seen in Figure 4 (above), while limiting potential gains at times to add a meaningful level of downside risk mitigation. This ultimately results in a portfolio with a more predictable return distribution that investors can stick with in good times and bad.

Figure 6

Plug and Play: A Simple Managed Solution

Lastly, for advisors who like the idea of Notes but want the convenience of a managed solution, separately managed accounts are now available. 

For example, the Halo WisdomTree Income Structured Note Strategy℠ can be an easy way to tap into the potential behind Structured Notes, but with the added benefit of two professional managers. 

Leveraging WisdomTree’s asset allocation expertise and Halo’s structured note capabilities, the strategy aims to generate generous income levels, improve risk-adjusted returns, and provide downside protection against market retreats.

This is just one of many managed solutions now available. Advisors are encouraged to explore the range of investment strategies making their way into portfolios.

The Bottom Line

These are just a few ways that Notes can be quickly added to a portfolio. As with all things investing, no two clients — or Structured Notes — are the same.

With tools like Aura and a personalized touch from the Halo team, advisors are increasingly working Structured Notes into portfolios.

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Please see our Halo Disclosure Page for important disclosures

An investment in Structured Notes may not be suitable for all investors. These investments involve substantial risks. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.

Content and any tools discussed are provided for educational and informational purposes only. Halo Investing makes no investment recommendations and does not provide financial, tax, or legal advice. Any structured product or financial security discussed is for illustrative purposes only and is not intended to portray a recommendation to buy or sell a particular product or service.

US379/1.0/2509