Corporate paper are securities issued by companies to fund their various capital needs. The most common forms of corporate paper are commercial paper (short-term, up to 1 year), medium-term (1 year up to 5 years) and corporate bonds (5 years or more). These securities provide companies with alternative access to debt capital as opposed to bank loans and institutional loans. It provides investors a way to participate in alternative fixed income opportunities that typically have better returns than that of bank deposits, government securities and unit trusts (mutual funds). Investments in these securities must be held to maturity unless otherwise stipulated, which may put constraints on liquidity access to investors.
The risk profile helps you determine the risk/reward element of the investment. In this case, investing in Corporate Paper options is typically a bit risky because of the unsecured nature of the investment, however, the returns are slightly higher as a result. There are some instances where additional safety nets can be incorporated into the Corporate Paper structure which may reduce the level of risk.
Note: It is recommended that investors diversify their portfolios and seek professional advice before investing in securities.