Exchange Traded Funds (ETFs) and Structured Products are both valuable investment tools — but they play very different roles in a portfolio. Understanding their differences helps advisers and wholesale investors choose the right instrument for each investment objective.
What is an ETF?
An Exchange Traded Fund (ETF) is a basket of securities — such as shares, bonds, commodities, or derivatives — that trades on an exchange like a stock.
Key features:
- Broad market exposure in a single tradable security
- Priced throughout the trading day
- Often designed to track an index or rules-based strategy
- Cost-effective diversification compared to buying individual securities
Example: Instead of buying shares in 20 individual companies, you can buy units in an ETF that holds them all.
What is a Structured Product?
A Structured Product is a pre-packaged investment strategy designed to meet a specific objective over a defined term.
Key features:
- Combines underlying assets (e.g., equities, commodities, indices) with derivatives (options or futures)
- Can provide capital protection or enhanced returns depending on structure
- Typically traded over-the-counter (OTC) via investment banks
- Flexibility to target specific risk-return profiles and market conditions
Structured products can be built quickly to capitalise on trends and can be tailored for income, growth, or defensive positioning.
Similarities Between ETFs & Structured Products
- Diversification: Both can provide exposure to multiple asset classes or themes.
- Targeted strategies: Both can be aligned to specific goals (income, growth, thematic investing).
- Eligible for SMSFs and Trusts: Both are compliant for use in self-managed superannuation funds and trusts.
- Convenience: Both save time by packaging research, analysis, and execution into a single product.
Key Differences Between ETFs and Structured Products
Listing & Access
ETFs are listed on public exchanges and can be traded daily. Structured Products are not exchange-listed — they are issued directly by investment banks and accessed via platforms like Stropro.
Investment Objective
ETFs aim to deliver broad, low-cost exposure. Structured Products deliver targeted exposure with a defined risk-return profile.
Capital Preservation
ETFs generally have no built-in downside protection. Structured Products can include features like barriers or capital guarantees.
Timeframe
ETFs are open-ended and remain in the market until closed by the issuer. Structured Products have a fixed maturity — often 6 months to 5 years — providing certainty over the investment term.
Thematic Access
ETFs often provide generic thematic exposure and can take longer to launch. Structured Products can target very specific themes and be brought to market quickly.
Liquidity
ETFs can be bought and sold at any time during market hours. Structured Products are typically held to maturity, though early exit is sometimes possible.
Fees
ETFs generally have lower management fees. Structured Products may have higher costs due to their bespoke nature and use of derivatives.
When to Use Each
- Use ETFs when seeking broad market diversification, cost efficiency, and long-term core portfolio building.
- Use Structured Products when targeting a specific market view, seeking capital protection, or aiming for enhanced returns in a defined market scenario.
Summary
ETFs offer convenience, cost efficiency, and broad exposure. Structured Products offer flexibility, specificity, and the ability to tailor risk and return to precise investment goals.
With platforms like Stropro, wholesale investors can now access structured products alongside institutional-grade research and issuer relationships — making it easier than ever to combine both tools in one portfolio strategy.
Author: Anto Joseph, CEO, Stropro
For wholesale, sophisticated, and professional investors only. General information, not personal financial advice.
