Paragon's Craig Novorr joins Structured Notes Lab to explain why full principal protection costs investors more upside, and more in taxes, than it appears.
In a recent article for Structured Notes Lab, author Titu Bhowmick looks at the hidden costs of structured notes that promise 100% principal protection. He argues that every point of protection is paid for out of the investor's upside, and that the deepest layers of protection mostly insure against scenarios that almost never happen. He then turns to a less obvious cost. Fully protected notes are often taxed on "phantom" interest income that accrues every year, even though the note pays nothing until maturity. That can make them a poor fit for taxable accounts, though they may still make sense inside an IRA.
The article features Craig Novorr, President and CIO of Paragon Capital Management, who has run a structured note program for clients since 2014. Instead of choosing from the banks' monthly note calendars, Craig has issuers price notes to his own terms. That lets him set the protection level for each strategy: buffers on growth notes and deeper barriers on income notes. He explains why a 100% protected note isn't one of them: "We would never do a 100% principal protected." The article walks through his reasoning and the historical market data behind it.
Read the full article at Structured Notes Lab →
Originally published by Structured Notes Lab on August 24, 2026. Written by Titu Bhowmick.
This article was written by a third party and is provided for informational purposes only. It is not investment, tax, or legal advice, and Paragon Capital Management did not compensate the publisher.
