What is a key feature of principle protected notes?

A key feature of principal protected notes (PPNs) is the performance participation cap, which refers to the limit on the amount of upside that an investor can gain from the growth of the underlying assets. PPNs are structured to return the original principal amount to the investor at maturity while allowing some potential gains based on the performance of specified reference assets, such as stocks, bonds, or indexes. However, this potential for gain often comes with a cap, meaning that regardless of how well the underlying assets perform, the investor's return will not exceed a predetermined level.

This structure allows investors to protect their initial capital while still participating in market upside, albeit in a limited way. Hence, the feature of having a cap on performance participation is critical to understanding how PPNs balance risk and return.

Other features, such as guaranteed returns, regular payouts, and minimum investment thresholds, may or may not apply to all PPNs but do not encapsulate the defining characteristic that distinguishes them in the context of structured investment products.