Structured products are a broad label for a complex form of investment involving a combination of two or more financial instruments in a single structure. Usually integrated into the instrument are financial derivatives of one or more underlying assets with a pre-set maturity term. Profitability is largely determined by the performance of the underlying assets along with the return on the principal upon maturity.

Some structured products such as derivative warrants are traded on stock exchanges. Others – including currency-linked and equity-linked notes - are not listed and are sold by intermediaries such as banks.

The use of derivatives invariably entails counterparty risk. As holders of Lehman Brothers minibonds found out, unsecured investors stand no chance of getting paid if a counterparty goes bust. Since structured products are highly risky in general, they are not suitable for investors with little experience or insufficient knowledge of their workings.

Before putting money on structured products, an investor should gather and study marketing materials to understand the instrument's investment objectives, strategy, risks, fees and transaction procedures, etc.

Issuers are required to provide detailed marketing materials explaining all of the above. For a quick summary, investors may use a so-called "Key Facts Statement" (KFS) to check out a Hong Kong-marketed structured product. But a KFS is merely a thumbnail sketch. To make an informed decision, investors should understand from the detailed marketing prospectus to ascertain whether the structured product suits their investment objective and risk tolerance level.