Key Takeaways

  • Fixed Coupon Notes (FCNs) are sophisticated investment products that allow investors to generate returns based on the performance of the underlying securities and while earning a potentially higher interest rate than traditional fixed income products
  • FCNs pay out regular coupon payments over fixed intervals
  • The returns/payoffs for FCNs are dependent on the performance of the underlying securities
  • As FCNs are usually embedded with derivative instruments, investors should fully understand how each FCN works before investing in them

What are Fixed Coupon Notes (FCNs)?

Fixed Coupon Notes (FCNs) are equity-linked structured notes that seek to pay regular distributions at pre-defined intervals, where the payment of coupons is independent of the price movement of the underlying securities.

It is a way for investors with a specific view on the price movement of the basket of securities to generate additional cashflow while gaining potential exposure on the securities.

There are several scenarios that can happen when an investor chooses to invest in an FCN, all of which depend largely on the performance of the underlying securities.


Before we understand how FCNs work, it is important to know the terms associated with it.

The original sum invested in the FCN.

The regular payments earned from the FCN, paid out in pre-defined intervals.

Final Fixing Date
The date where the FCN matures, i.e. when the tenure of the FCN ends, and the underlying securities are assessed at their respective prices.

Poorest-performing Security/Least-performing Security
The worst performing security within a basket of underlying securities in an FCN, with reference to their strike price.

Strike Level/Price
Refers to the reference price at which the Least-performing Security is assessed to be lower, at or above on the Final Fixing Date (maturity) to determine if the principal is to be paid out in full or not upon maturity.

Observation Date/Monitoring Date
Agreed dates on which the underlying securities of an FCN is assessed to be at, above or below the Autocall level.

Autocall Level
Also known as knock-out level, it is the reference price at which the underlying securities are assessed to be either at, above, or below on the pre-defined Observation Date, to determine if the FCN is early-redeemed or not.

Redemption Date
The date on which the final coupon payment and principal are paid out to investors upon maturity.


When you invest in an FCN, the two main scenarios to consider are:

  • Early-redemption
  • Non-early redemption

Early redemption

Each underlying security within the basket of securities in an FCN has their respective autocall levels. Early redemption happens if all underlying securities close at or above their autocall levels on any Observation Date.

When that happens, 100% of the principal will be repaid to investors, together with the coupon amounts accrued.

Non-early redemption

In this scenario, the FCN will run its full period of investment up to maturity. There are three separate sub-scenarios to consider.

(i) If all underlying securities close at or above its strike level on the Final Fixing Date, the principal is returned to you at 100% on the Redemption Date. You will also receive the fixed coupon amount.

(ii) If the poorest-performing security closes below its strike level on the Final Fixing Date, the principal is returned to you* on the Redemption Date, minus the percentage difference between the strike price and the closing price of the poorest-performing security. You will still receive the fixed coupon amount.

(iii) In the event that any of the underlying securities closes at zero on the Final Fixing Date, you will receive the fixed coupon amount and lose all the invested capital.

*in the case of a cash-settled FCN

Advantages of FCNs

FCNs typically offer a higher interest rate than traditional deposits, which can help you achieve a potentially higher return while spreading your capital across a variety of securities, thereby diversifying your portfolio.

In addition, you will receive fixed coupon payments over time, and are protected from  negative price movements on the underlying securities within a pre-defined range/buffer.


There may be a chance where any underlying security drops to zero on the Final Fixing Date, in which case you will lose your principal. This makes FCNs a risky investment because they depend on the performance of the underlying securities, and underperformance of any one underlying security may cause a 100% loss of your principal.

In addition, it is important to note that even if any underlying securities perform way above strike levels, unlike direct investments in the securities, you will not reap the proportionate upside and are limited to the returns pre-determined by the FCN.

As with any other investment, do your own due diligence on the underlying securities and the issuer, as these play a part in underscoring the reliability or trustworthiness of the FCN and may help you to decide if the FCN is the right choice for you.

Should you invest in FCNs?

FCNs may offer attractive returns in low-interest rate environments, but also carry a considerable amount of risk in volatile markets. You may look forward to potentially higher returns than traditional fixed income products, but you must also be prepared for the risk of losing a substantial amount of money that you invest.

As FCNs can be a sophisticated investment product, you should fully comprehend how the returns are calculated, and weigh them against how the future performance of the underlying securities may be.

If you are looking for an investment to make over a certain period of time and are willing to leave your money tied up until the maturity date, FCNs may then be an investment you can consider.


Fixed coupon notes are popular wealth management products as it gives you a regular coupon amount over a period of time, and usually provide higher interest rates than bonds, or other traditional deposits. They may be an attractive investment option for investors who wish to diversify their portfolio and build a more robust basket of investments.

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