Performance-linked note (PLN) are essentially debt instruments, similar to a bond, that differs from a standard fixed-income security in that the final payout is based on the return of the underlying asset holdings of the issuer, which can be a portfolio of securities, equity indices, real assets, investment funds, private equity investments, or any combination of all the aforementioned. Performance-linked notes are a type of structured products.
Using Performance Linked Notes can be an efficient, flexible and cost-effective structure, which is very easy to setup and secure regulatory approval and may now be considered as an effective alternative to an investment fund for managing various portfolio of assets.
In order to secure regulatory approval to market the Performance Linked Notes throughout the EU28 and beyond, the Notes are listed on the Third Market of the Vienna Stock Exchange.
The proceeds of the Performance Linked Notes are invested in an underlying asset (or pool of assets) with investors taking the benefit or loss of investment. Thus, when the performance of the underlying asset increases, the Net Asset Value increases and when there are losses, the NAV declines. This resembles the performance of a fund unit which is based NAV.