A fixed or predetermined percentage (participation or participation rate) by which any increase in the underlying asset/ basket/ index of a participation product (such as tracker certificates, twin-win certificates, outperformance certificates, and bonus certificates) is multiplied. In the case of a structured product, the performance consists of a minimum fixed return in addition to a “participatory” rate of return (calculated by multiplying any increase in the underlying basket/ index by the participation rate).
Participation allow the holder/ investor of a certain financial product with participation feature to take part in the performance of an asset or basket of assets.
For example, a typical structured product may be designed to offer a minimum 100% return of capital (capital protection) at maturity, plus 70% of any increase (i.e., the participation rate) in a given stock market index. So if the index moved up by 50% over the period, then the investor would receive back the capital in full plus an additional return of 35% (i.e., 70% of 50%).
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