How do structured funds work and who are they for?

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Structured funds appeal to savers looking for an alternative to traditional investments, halfway between the security of euro funds and the potential of equity markets. Behind their promise of a return defined in advance, however, lies a complex mechanism that must be understood before investing your money. This guide covers the definition of a structured fund, how it works, the different types, returns and risks, taxation, and its place in a wealth diversification strategy.

What is a structured fund?

A structured fund, also known as a structured product, is a financial instrument whose performance is calculated according to a mathematical formula defined at subscription. This formula depends on the performance of an underlying asset: most commonly a stock index (such as the CAC 40 or Euro Stoxx 50), a share or a basket of assets. Unlike a traditional investment fund, the investor knows the rules of the game in advance: the level of protection, the conditions for coupon payments and the investment horizon.

A structured fund generally combines two components: a bond component, which aims to protect all or part of the capital, and an options component, which seeks performance linked to the underlying asset. This structure allows the risk/return profile to be adjusted according to the desired outcome, balancing the pursuit of security with market exposure.

How does a structured fund work?

A structured fund operates on three key parameters defined at launch.

The underlying asset

This is the reference asset on which performance depends: an index, share or basket. The performance of this underlying asset during the life of the product determines coupon payments and capital repayment.

The protection barrier

This sets the level below which capital is exposed to loss. As long as the underlying asset remains above this barrier (for example, -40% relative to the initial level), capital is protected at maturity. Below this threshold, the investor suffers a loss proportional to the decline.

Maturity and the autocall mechanism

Maturity refers to the maximum duration of the investment, often between 2 and 10 years. Many structured funds include an early redemption mechanism, known as an autocall: at each observation date, if the underlying asset exceeds a defined threshold, the product is redeemed early with the accrued coupons.

The different types of structured funds

Several families of structured funds can be distinguished according to the level of capital protection.

Capital-guaranteed funds: the invested capital is returned in full at maturity, regardless of how the underlying asset performs. The trade-off is a more limited potential gain.

Capital-protected funds: partial protection applies up to a certain level of decline (the barrier). Beyond that, capital is eroded.

Non-capital-guaranteed funds: no protection at maturity; the potential return is higher but the risk of total capital loss exists in an adverse scenario.

In all cases, the guarantee or protection only applies at maturity and depends on the financial strength of the issuer: counterparty risk is added to market risk.

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What returns and what risks?

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The return on a structured fund takes the form of conditional coupons, paid if the underlying asset meets the conditions set out in the formula. This return is capped: unlike a direct equity investment, the investor does not benefit from the full upside of the underlying asset. In exchange, they gain visibility over the scenarios and, depending on the product, partial downside protection.

The risks remain very real. Market risk (the underlying asset falling below the barrier) can result in capital loss. Added to this are counterparty risk linked to the issuer, liquidity risk (exiting before maturity may be done at an unfavourable price) and the complexity of the formula, which makes evaluation difficult for a non-expert investor. The AMF regularly warns about the complexity of these products and the need to understand how they work before investing.

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Taxation of structured funds

The taxation of a structured fund depends on the wrapper in which it is held. Held within an ordinary securities account, gains are subject to the flat tax (PFU) of 30%, including social levies. Held within a life insurance contract, it benefits from the advantageous tax framework of that wrapper, particularly after eight years of holding. Certain products eligible for the PEA benefit from its exemption from income tax on gains after five years (excluding social levies). The choice of wrapper is therefore crucial for optimising the net return.

Structured funds or private equity: which diversification?

A structured fund is one tool among others for diversifying a portfolio. Its performance remains linked to listed markets via its underlying asset: in the event of a prolonged market shock, the protection may prove insufficient. To balance a portfolio, it makes sense to combine it with assets whose performance is partly decorrelated from stock markets, as our analysis on building a diversified portfolio shows.

Unlisted assets play precisely this role. Investing in private equity means financing unlisted companies: this asset class has delivered a net return of 12.4% per year over ten years for the French market, compared to 8.9% for the CAC 40 with dividends reinvested (France Invest/EY). Long reserved for institutional investors, investing in unlisted assets is becoming accessible to retail investors through pooled structures. Fundora uses a professional private equity fund (FPCI) that pools subscriptions within a single structure, which then invests in selected private equity strategies. Effective management is provided by Kyoseil Asset Management, an AMF-approved portfolio management company, under a mandate. The performance targets displayed are objectives, not guaranteed returns, and unlisted investment carries a risk of capital loss and low liquidity.

How to invest in a structured fund?

Structured funds are subscribed primarily through a life insurance contract, a securities account or a capitalisation contract, often during limited commercial windows. Before investing, it is essential to read the Key Information Document (KID), understand the formula, identify the actual level of protection and verify that the product is suitable for your horizon and risk profile. The same rule of prudence applies as with any investment: diversify and avoid concentrating your capital in a single vehicle, however attractive it may appear.

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FAQ: structured funds

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What is a structured fund in plain terms?
It is an investment whose return follows a formula defined in advance, linked to the performance of an underlying asset (index, share, basket) over a fixed term. Depending on the product, capital may be guaranteed, protected up to a certain threshold, or exposed to a loss.

Is a structured fund risk-free?
No. Even a so-called capital-guaranteed product carries counterparty risk linked to the issuer, and the guarantee only applies at maturity. Non-capital-guaranteed funds expose the investor to capital loss if the underlying asset falls below the barrier.

What is the duration of a structured fund?
The maturity is set at subscription, generally between 2 and 10 years. Many products include an early redemption mechanism (autocall) if the underlying asset reaches a defined threshold at an observation date.

How is a structured fund taxed?
Taxation depends on the holding wrapper: flat tax of 30% in a securities account, favourable life insurance taxation after eight years, or PEA exemption after five years (excluding social levies).

Should you choose a structured fund or private equity?
These are two different and complementary approaches. A structured fund offers visibility and sometimes protection, but remains linked to listed markets. Private equity targets long-term performance decorrelated from stock markets, with a risk of capital loss and low liquidity. Both can coexist within a diversified portfolio.

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