Index Participation Unit (IPU)

Index Participation Unit or IPU is an index-linked product comprising a basket of securities. It allows investors to trade in an equity market index without having to trade the underlying securities individually. The market price of Index Participation Unit is based on the value of the underlying equity index. It thus replicates or mimics the underlying index and its performance is largely in line with this index. The issuer might make payments to Index Participation Unit holders in proportion to their investment in the underlying stock portfolio. Two types of IPU products are Cash-settled Index Participation Units and Physical-settled Index Participation Units.