The Rise of Thematic Structured Products and Certificates: Opportunities in Europe and Switzerland

Thematic structured products and certificates have been gaining significant traction in recent years, particularly in Europe and Switzerland.

These financial instruments are designed to provide investors with exposure to specific sectors, industries, or trends, offering a unique way to diversify their portfolios and tap into emerging opportunities.

With the added benefits of diversification, professional management, liquidity, and cost efficiency, thematic structured products and certificates have become an increasingly popular investment choice for retail investors seeking to capitalize on emerging opportunities in today’s dynamic global markets.

Structured products are financial instruments that combine various assets, such as equities, indices, commodities, or currencies, with derivatives like options or swaps. They are created to achieve specific investment objectives, such as capital protection, income generation, or participation in market gains.

Thematic structured products, on the other hand, target specific sectors or trends, allowing investors to capitalize on their growth.

Certificates, a popular type of structured product, are debt securities that track the performance of an underlying asset, such as an index or a basket of equities.

Thematic certificates focus on particular sectors, industries, or trends and are especially appealing for retail investors looking to gain targeted exposure to specific investment themes.

Growing Popularity of Thematic Structured Products and Certificates

The increasing demand for thematic structured products and certificates can be attributed to several factors:

1. Evolving global trends: With rapid technological advancements, shifting consumer preferences, and emerging sustainability concerns, investors are increasingly looking for ways to gain exposure to industries and sectors that are poised for growth. Thematic structured products and certificates allow them to invest in specific themes, such as clean energy, robotics, or e-commerce, capturing the potential upside of these developments (1).

Source: (1) BlackRock, “The Rise of Thematic Investing,” 2020. https://www.blackrock.com/institutions/en-us/insights/investment-actions/thematic-investing

2. Diversification and risk management: Thematic structured products offer investors the opportunity to diversify their portfolios by targeting unique market segments that may not be correlated with broader market trends. This can help improve risk-adjusted returns and reduce portfolio volatility.
3. Customization and flexibility: Investors can tailor their exposure to specific themes or sectors using thematic structured products and certificates, allowing for greater control over their investment strategy. This flexibility is particularly appealing to retail investors who may have limited access to direct investments in specific industries or trends.

Examples of Thematic Structured Products and Certificates

Several thematic structured products and certificates have gained popularity in recent years, reflecting investor interest in various sectors and trends. Some examples include:

1. Green Bonds: Green bonds are a type of thematic structured product that finances environmentally-friendly projects, such as renewable energy, energy efficiency, or pollution prevention initiatives. For example, the Swiss-based bank, UBS, launched a series of green bond certificates in 2019, offering investors exposure to a diversified portfolio of green bonds (2).

Source: (2) UBS, “UBS Launches Green Bond Certificates,” 2019. https://www.ubs.com/global/en/media/display-page-ndp/en-20191029-green-bond-certificates.html

1. Robotics and Automation: As automation and robotics gain prominence in various industries, investors have shown increased interest in thematic products that target this sector. In 2017, Vontobel launched a Robotics and Automation Certificate, allowing retail investors to participate in the growth of robotics and automation companies (3).

Source: (3) Vontobel, “Invest in Robotics and Automation,” 2017. https://www.vontobel.com/en-int/about-vontobel/media/communications/invest-in-robotics-and-automation/

Potential Benefits for Retail Investors in Europe and Switzerland

Thematic structured products and certificates offer several advantages for retail investors in Europe and Switzerland:

Accessibility: Thematic structured products and certificates enable retail investors to access specific sectors, industries, or trends that may otherwise be difficult to invest in directly.

This can be particularly beneficial for those who lack the time, resources, or expertise to research and invest in individual stocks or other assets within their chosen theme.

2. Diversification: Investing in thematic structured products and certificates can help retail investors diversify their portfolios by providing exposure to a particular sector or trend. This can potentially reduce risk and enhance returns, as these instruments may not be closely correlated with the broader market or other investments in an investor’s portfolio.
3. Professional Management: Thematic structured products and certificates are typically created and managed by experienced financial institutions, which possess the resources and expertise to carefully select and monitor the underlying assets. This professional management can help retail investors navigate the complexities of investing in specific sectors or trends, while potentially improving the risk-reward profile of their investments.
4. Liquidity: Thematic structured products and certificates are often traded on exchanges or through over-the-counter (OTC) markets, providing retail investors with a degree of liquidity. This allows investors to easily enter and exit positions as their investment objectives or market conditions change.
5. Cost Efficiency: Thematic structured products and certificates can offer a cost-effective way for retail investors to gain exposure to specific sectors, industries, or trends. By pooling resources with other investors in a structured product or certificate, retail investors may benefit from economies of scale, leading to lower trading and management costs compared to direct investments in individual stocks or other assets.

Examples of Thematic Structured Products and Certificates

Several thematic structured products and certificates have gained popularity in recent years, reflecting investor interest in various sectors and trends.

Some examples include:

1. Green Bonds: Green bonds are a type of thematic structured product that finances environmentally-friendly projects, such as renewable energy, energy efficiency, or pollution prevention initiatives. For example, a Swiss-based bank launched a series of green bond certificates in recent years, offering investors exposure to a diversified portfolio of green bonds.

2. Robotics and Automation: As automation and robotics gain prominence in various industries, investors have shown increased interest in thematic products that target this sector. A leading European financial institution launched a Robotics and Automation Certificate, allowing retail investors to participate in the growth of robotics and automation companies.

3. E-commerce and Digitalization: The rapid growth of e-commerce and the digitalization of various sectors have attracted the attention of investors looking for targeted exposure to these trends. A European bank issued a thematic certificate that tracks the performance of a basket of e-commerce and digitalization-focused companies, enabling retail investors to invest in this booming industry.