posted on 06-06-2019

Structured Portfolio

Updated August 6, 2020

What is a Structured Portfolio?

A structured portfolio is a type of passively managed portfolio whose cash inflows are designed to meet the cash outflow requirements to fulfill a future obligation.

How Does a Structured Portfolio Work?

A structured portfolio is also referred to as a dedicated portfolio.

For example, a company with pension obligations that will begin in 5 years may set up a structured portfolio that has the two goals of a) being worth X dollars in 5 years, and b) will generate Y dollars in annual cash flow to match the cash flow needed to fulfill the pension obligations.

A structured portfolio is generally made up of investment grade securities (typically bonds) that have very low risk of default. Because of the portfolio's low risk and use of investment grade securities, a structured portfolio will rarely need to be rebalanced (i.e. it can be passively managed).

Why Does a Structured Portfolio Matter?

Structured portfolios are important and most useful for investors who require a reliable source of income for the future (such as retirement). Because the goal of a structured portfolio is to produce stable cash flows, it should be mainly invested in investment grade bonds and other income-producing assets with extremely low volatility.