While planning for my Accredited clients' investment portfolio construction, I come across a very good structured notes which I will recommend to be part of their portfolios:

The structured note is denominated in EUR. The maturity date is merely 2 years and 2 months. The underlying basket is simply the absolute change in the foreign exchange rate of EUR/USD. Thus, for every EUR 1000 originally invested, at maturity:

If the EUR appreciate against the USD by 20%, then the investor redeems at EUR 1200.

If the EUR depreciate against the USD by 15%, then the investor redeems at EUR 1150.

The worst can happen is when the USD and EUR forex rate remains unchange over the two year 2 months period. Then the investor gets EUR 1000 back.

From what I think, this is one of the best structured notes I seen because (1) the maturity period is very short (not those lousy 5 to 10 years one!) (2) Easy to understand (3) Denominated in EUR rather then in USD because the latter is a well-known weak currency.

From backtesting as the EUR as appreciated against the USD by 16.97% over the past 2 years 2 months period, the hypothetical investor could have earned 16.97% in return. That is to say that for EUR 1000 invested, he redeems at EUR 1169.7. I think this is pretty cool considering there is minimum risk. 

This note can be use to be part of the "fixed income" section of the portfolio. Traditionally, fixed income consists of bond funds. Instead of putting all fixed income into bond funds, why not put some into this note. In terms of currency risk it is the same if I would to put in a european bond funds. But at least the potential upside for this note is much higher then a european bond fund. Moreover, a bond fund capital is not guaranteed whereas this note's capital is guaranteed at maturity which is merely only 2 years & 2 months.

(Opps... I just realized, the commission is terrible! So will have to charge the client a fee to do this...)

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