Structured Funds Explained 2025: Prices, Benefits, and How They Work

Andy Smith, a Certified Financial Planner (CFP®), licensed realtor, and educator with over 35 years of experience, specializes in personal finance, corporate finance, and real estate, helping thousands achieve their financial objectives.

What Are Structured Funds in 2024?

Structured funds are innovative investment portfolios that combine equity securities with fixed-income products to deliver both capital protection and opportunities for capital appreciation. By allocating a significant portion of assets to fixed-income instruments, these funds aim to safeguard principal investment while generating steady interest income. Simultaneously, they incorporate derivatives such as options and futures tied to market indices to capture growth potential.

Key Highlights

• Structured funds blend equities and fixed-income assets to balance risk and reward, offering downside protection alongside upside market exposure.
• They appeal to conservative investors who want to protect their capital while still benefiting from market gains.
• Typically, structured funds guarantee a percentage of the principal; for instance, an 80% principal protection means that 80% is invested in low-risk fixed-income products, minimizing the chance of loss below that level.

How Do Structured Funds Operate?

Structured funds are professionally managed portfolios available to retail investors, often through brokerage platforms or financial institutions. These funds invest primarily in fixed-income securities, such as certificates of deposit, to ensure capital protection over a defined holding period. The remaining portion is directed towards derivatives linked to market indices to provide growth potential.

Because of the fixed-income focus, these funds typically require investors to commit their capital for a longer term, as liquidity options may be limited. Approximately 20% of the portfolio is invested in market-linked derivatives like swaps, options, and futures, designed to enhance returns based on the performance of indexes such as the S&P 500.

Structured funds are ideal for investors seeking long-term capital preservation combined with the possibility of higher returns than traditional money market funds or high-yield savings accounts.

For example, a structured fund linked to the S&P 500 with 80% principal protection invests 80% in secure fixed-income assets and 20% in derivatives connected to the index. This structure allows investors to participate in market gains while limiting downside risk to no less than 80% of the initial investment.

Investing in Structured Funds in 2024

Leading financial platforms like Fidelity provide access to structured funds tied to prominent indices such as the Euro STOXX 50, S&P 500, S&P 500 Low Volatility High Dividend, and Dow Jones Industrial Average.

Goldman Sachs is a major issuer of structured funds linked to the Dow Jones Industrial Average, primarily investing in certificates of deposit and applying cap rates between 50% and 58% to returns on the index.

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