A Basket of Structured Notes in a UIT Structure: Diversifying Across Issuers with One CUSIP

A single structured note is a contract with one bank. If you own that note, your return, and your exposure to issuer credit risk, is tied to that one issuer for the life of the note. A basket structured as a unit investment trust (UIT) takes a different approach: it pools a group of individual structured notes, often issued by 10-15 different banks, into one fund with a single CUSIP.

A UIT-style basket doesn't replace the structured note, it wraps a collection of them. Instead of allocating $100,000 to one note from one bank, the trust allocates smaller pieces of that same $100,000 across many individual notes, each with its own issuer, underlying, and terms. The trust holds all of those notes, and investors buy units of the trust rather than the individual notes themselves.

Each underlying note inside the basket still has its own issuer, its own barrier or coupon-contingency level, and its own linked underlying (an index, an ETF, or a basket of stocks). What changes is how the investor accesses it: through one CUSIP representing a proportional interest in the whole basket, rather than a separate CUSIP for every note.

Holding 15 individual structured notes directly means tracking 15 separate CUSIPs, 15 sets of terms, 15 observation schedules, and potentially 15 different maturity or call dates. For most investors, and honestly for most advisors, that's a lot of moving parts to monitor position by position.

A basket structure collapses that complexity into a single position. The investor (and their advisor) can see one line on a statement, with one NAV, that represents a proportional slice of the entire underlying pool of notes. The individual notes are still there, doing their individual jobs, but the bookkeeping, monitoring, and reporting happen at the basket level instead of the note-by-note level.

To make this concrete, here are the actual terms of a basket we've reviewed, illustrative of how this structure works in practice. This is a real example of a UIT-style basket, not a current offer, solicitation, or recommendation, terms like these change with every new basket that comes to market.

• Structure: 15 different non-callable structured notes bundled into a single CUSIP
• Term: 3 years, non-callable
• Yield: 11.78%-12.16% per annum, blended across all 15 notes, paid monthly
• Allocation: ~49% of the basket in index/ETF-linked notes; ~51% in equity-linked notes (with memory)
• Index-linked notes: 70% EKI (downside threshold) and 70% coupon barrier
• Equity-linked notes: 50% EKI (downside threshold) and 50% coupon barrier, with memory
• Liquidity: Daily liquidity at NAV (rather than being locked to a single note's maturity date)
• Minimum investment: None
• CUSIP: 62480B229
• Inception date: 2/26/2026

Here are the 15 individual notes that made up this particular basket, along with each one's issuer, structure, underlying basket, weighting in the fund, and terms:

Notice that no single issuer represents more than about 12% of the basket, and most represent under 5%. That's credit diversification in action: this basket spreads exposure across 15 different banks headquartered across North America, Europe, and Asia, rather than concentrating it in any one institution.

A basket structure isn't automatically "better" than a single note, it's a different tool with its own trade-offs.

• Blended terms, not customized terms. A single note can be negotiated around a client's specific view or need. A basket's terms are fixed once it's assembled, an investor is buying the blended package, not choosing each underlying individually.
• Daily liquidity at NAV is a real feature, but NAV still moves. Because the trust is priced daily based on the value of everything it holds, an investor isn't locked into one note's exact maturity date the way they would be with a single note. That said, the daily NAV will still fluctuate with market conditions and the value of the embedded notes, so "liquid" doesn't mean "stable."
• Market and credit risk are reduced, not eliminated. Spreading across 15 issuers substantially reduces single-issuer credit risk, but the basket still carries the collective credit risk of all 15 banks and the market risk of the underlying indices, ETFs, and stocks.
• Yield ranges are estimates until pricing is finalized. Structures like this are typically marketed with an indicative yield range (such as the 11.78%-12.16% shown here) ahead of a final pricing date, and the individual note terms can move within their stated ranges before the trust is finalized.

• A UIT-style basket bundles multiple individual structured notes, often from 10-15 different issuing banks, into one CUSIP, rather than requiring an investor to hold each note separately.
• The main benefit is credit diversification: no single bank's credit problem can impair the whole position the way it would with a single note.
• Baskets can also mix note types and underlyings (in this example, roughly half index/ETF-linked and half single-stock, memory-coupon notes), adding structural diversification on top of issuer diversification.
• One CUSIP means simpler tracking and reporting versus monitoring 15 separate notes, terms, and observation schedules individually.
• Daily liquidity at NAV is a meaningful convenience versus being tied to a single note's maturity, but it doesn't eliminate market or credit risk, and blended terms mean less customization than a single, individually-negotiated note.