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Introducing Structured Token Notes by GreatOne

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The essence of investment management is the management of risks, not the management of returns.

- Benjamin Graham

What renowned American economist Benjamin Graham once said is still poignant in today’s world. Risk is an intrinsic part of the investment, and a savvy investor knows how to navigate risky ventures. While sound advice and a “game of patience” is necessary, certain investment tools also come in handy. A structured note is a debt security issued by financial institutions. A debt obligation also contains a derivative component that adjusts the risk-return profile of the security.

Structured notes render flexibility that allows them to provide numerous potential payoffs that are challenging to find elsewhere. Additionally, structured notes may increase or decrease upside potential, downside risk, and overall volatility. While structured notes offer a wide array of advantages and lucrative returns, several disadvantages can handicap your investment in the long run.
Structured Note Tokens by GreatOne

Traditional Structured Notes

Structured notes are the most powerful portfolio tool to enable investors to target and achieve anticipated returns. All structured notes have two underlying pieces; derivative and bond components. The bond component provides principal protection and takes up most of the investment. On the contrary, the remaining investment amount is used to procure a derivative product that provides upside potential to investors. The derivative component provides exposure to any asset class.

Structured notes can also place irrational wagers on particular events. The VIX, which measures stock market volatility, may impact a structured note. Even in flat markets, a different structured note based on bull put spreads can provide sizable gains. However, such a note would have substantial downside risk when the stock market suffers minor losses.

That said, traditional structured notes are largely outdated, lack transparency, and are inaccessible to many investors. Many times, the opportunities are specific to geography.

Here are some common disadvantages of conventionally structured notes.

Structured Note Risks

  1. Lack of Liquidity
    For holders of structured notes, low liquidity is frequently a problem. Structured notes’ flexibility makes it challenging for sizable markets to form certain notes. Therefore, buying or selling a structured note on a secondary market is challenging.

  2. Market Risk
    All investments carry some kind of market risk, and structured notes are no exception. The principle of some organised notes is protected. If they don’t, they may lose some or all of their capital. When the underlying derivative becomes unstable, this risk appears.

  3. Default Risk
    Some structured notes may have a larger default risk than derivatives and debt obligations. The investment could lose its total value if the note’s issuer defaults.

Introducing GreatOne’s Structured Note Tokens (SNT)

Structured note tokens have the potential to provide downside protection to an investor’s portfolio by acting as portfolio balancers. Additionally, the tokens can improve wealth creation’s risk/return profile.

Key Features of GreatOne’s SNTs

The GreatOne platform offers structured note investment opportunities and information. One example of this is GreatX which offers the benefits of real estate income tokenization for stabilized U.S. real estate asset classes, including hospitality, multifamily apartments, student housing and senior living communities. GreatX’s structured note tokens are different from traditional notes.

  • Unlike traditional structured notes, our structured note tokens are globally accessible. These tokens expect to have better tradability and traceability than conventional notes.
  • Furthermore, our structured note tokens have cost and governance transparency as compared to traditional notes offering limited transparency.
  • Another key feature of these tokens is principal protection. All structured note GreatX tokens offer principal protection backed by US treasury bonds.
  • Other significant features include yield enhancement, upside participation, risk ring-fencing, and diversification.

Final Thoughts

While structured tokens offer several advantages, conventional tools still have certain disadvantages. Investors will benefit from more security and diluted risk pertaining to invested capital. GreatOne’s structured token notes offer yield enhancement and protection against a price decline. With GreatOne’s structure, investors can get greater control and flexibility in constructing their portfolio with GreatOne’s tokens.

Disclaimer

This commentary is provided as general information only and is in no way intended as investment advice, investment research, a research report or a recommendation. Any decision to invest or take any other action with respect to the securities discussed in this commentary may involve risks not discussed herein and such decisions should not be based solely on the information contained in this document.

Statements in this communication may include forward-looking information and/or may be based on various assumptions. The forward-looking statements and other views or opinions expressed herein are made as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated and there is no guarantee that any particular outcome will come to pass. The statements made herein are subject to change at any time. GreatOne disclaims any obligation to update or revise any statements or views expressed herein.

In considering any performance information included in this commentary, it should be noted that past performance is not a guarantee of future results and there can be no assurance that future results will be realized. Some or all of the information provided herein may be or be based on statements of opinion. In addition, certain information provided herein may be based on third-party sources, which information, although believed to be accurate, has not been independently verified. GreatOne and/or certain of its affiliates and/or clients hold and may, in the future, hold a financial interest in securities that are the same as or substantially similar to the securities discussed in this commentary. No claims are made as to the profitability of such financial interests, now, in the past or in the future and GreatOne and/or its clients may sell such financial interests at any time. The information provided herein is not intended to be, nor should it be construed as an offer to sell or a solicitation of any offer to buy any securities. This commentary has not been reviewed or approved by any regulatory authority and has been prepared without regard to the individual financial circumstances or objectives of persons who may receive it. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives.

Laxmi Narayanan

About the Author

Lakshmi Naraynanan is the founding member and  managing partner of Great One digital Holdings. A  passionate serial entrepreneur with a deep passion towards giving back and impacting lives. He is a certified senior executive fellow from Harvard Kennedy Public school of government (HKS).

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