Institutional investors in Ghana are turning to derivative‑based structures to broaden their exposure to foreign equities and sovereign debt without the need to purchase the underlying assets directly. Equity‑linked deposits combine a traditional deposit with an equity call option, while credit‑linked deposits pair a deposit with a credit default swap, creating synthetic exposure to a chosen equity or sovereign entity.
In an equity‑linked deposit, the investor places funds in a deposit and receives the principal at maturity, subject to the issuer’s creditworthiness. The return enhancement comes from the call option on a single stock, an equity index such as the MSCI World or S&P 500, or a basket of equities. The structure can be customised to the investor’s market view, horizon and return target, and a cross‑currency swap overlay can convert payouts into the local currency.
Credit‑linked deposits work similarly but focus on credit risk. By combining a deposit with a credit default swap, the investor gains exposure to a sovereign or corporate bond’s coupon profile without holding the bond itself. The coupon size reflects the reference entity’s default probability, and payment frequency can be tailored to cash‑flow needs.
Both products eliminate the administrative burden of opening securities depository accounts in foreign jurisdictions, but they do not eliminate credit risk. If a credit event occurs, the investor may lose part or all of the invested amount, depending on the product terms and recovery value.
These derivative‑based solutions are gaining traction in East and Southern Africa, where institutional clients seek higher yields and broader diversification while maintaining a deposit‑based investment framework.
