The western world is still suffering from the effects of the financial crisis and economic collapse in 2008. The fundamental problem continues to be the excessive level of debt that has accumulated over the past 30 years. The challenge facing governments and central banks is how to contain the debt crisis and at the same time maintain economic activity during the deleveraging process that is now taking place.

The complexity of the euro crisis that began as a banking crisis and extended into a sovereign debt crisis has yet to be resolved but the pronouncement of the European Central Bank that it is willing to do whatever it takes to preserve the euro has calmed investor nerves.

The trade-off between fiscal austerity and economic growth is being increasingly challenged in the absence of reforms being agreed to deal with the fundamental shortcomings of the euro currency system.

The turmoil in financial markets over the past four years has caused investors to become more risk averse. Wealth preservation has become the most important investment objective for many investors but they still have to place their money where they think it will achieve the best return for a given level of risk. The challenge, however, is to determine the level of risk that is commensurate with the potential return that may be achieved.

Structured deposits offer a solution to this by enabling investors to manage their risk exposure for a given level of potential return. The opportunity cost is the risk free rate of return that would otherwise be earned over the same investment term. Investors must therefore evaluate the trade-off between these returns in their quest for better performance.

Other factors that need to be considered include the underlying asset of the investment and the term of the deposit. Taking all of these factors into account, investors are increasingly using structured deposits as a separate component in the construction of their investment portfolios in order to produce a more optimal trade-off between risk and return.