A structured equity-linked note (ELN) that is issued not by the company whose stock is used as underlying equity, but by another entity such as an investment bank. This product consists of two components: a long position in a stock (long stock) and a short position in an out-of-the-money call option. It is settled in cash on maturity date based on the market value of underlying equity at the time. In this respect, it can be likened to a PERCS as both enable investors to enhance current income in consideration for the cap placed on upside participation.

However, synthetic high-income equity-linked security (SHIELDS) is customizable to investors’ needs as it may be structured using any type of of equity (individual stocks, stock indices, stock baskets, etc). Yet, it differs from a PERCS in that PERCS securities are usually issued by the same company as that of the underlying stock. That is why it is also known as a synthetic PERCS.