Which of the following is considered a disadvantage of structured products?

Structured products often combine various financial instruments, such as equities, bonds, or derivatives, designed to provide bespoke risk-return profiles. One significant disadvantage of these products is that investors face exposure to credit risk. Credit risk arises because structured products are typically linked to the performance of a reference asset or a set of underlying assets, and they can result in loss if the issuer experiences financial difficulties or defaults. In such scenarios, the investor may not receive their expected returns or even the principal investment. Understanding this risk is crucial for investors, as it is a key factor to consider when evaluating the overall risk profile of their investments in structured products.

The other options highlight characteristics of structured products that may not reflect their potential downsides. For example, they can be complex rather than simple to manage, do not inherently guarantee high liquidity, and do not assure guaranteed income payments. These elements illustrate the nuanced nature of structured products, where many advantages can be overshadowed by significant risks, particularly credit risk.