ONE Investment Webinar Demystifies PPNs

Principal Protected Notes (PPNs) are complex financial instruments. While there is no legal definition of the term, they allow an investor to get some exposure to equity markets, while still guaranteeing the initial investment when the PPN reaches maturity (typically 3+ years in the future). Investment brokers have touted the benefits of PPNs to municipalities for years because they appear to offer no downside with potential upside in the form of positive equity market returns. 

The PPN opportunity is, however, not that simple and municipalities have more options than ever to invest strategically. Every municipality is looking to improve investment returns in an uncertain economic landscape, but it’s important to know how PPNs are structured. Given their complexity, the return structure and embedded fees for PPNs can be unclear. It is crucial to understand the particulars, to ensure this type of security is appropriate for your investment needs.  

The timeframe of your investment is critical to determining what investment product will get you the best return with the least risk. While there can be short-term swings, over the longer term, financial markets have grown consistently. There is a strong case for strategic and informed exposure directly to equity markets which may lead to higher overall returns. The probability of incurring losses on equity investments tends to diminish as the investment horizon is extended.  This has direct implication for investors considering investing in PPNs. The important thing is to understand what you are investing in and the realistic outcome opportunities. 

To learn more about PPNs, take a look at ONE Investment’s previous webinar that helps demystify them.