Guaranteed Products - but by whom and under what conditions?

Investment Solutions that offer the Investor a guarantee for the return of part or all of its investment appear to many Investors to be the Holy Grail of Investing.
One of the fundamental tenets of Portfolio Theory is the relationship between risk and return. The higher the expected return the more risk has to be assumed by the Investor.
As we all would like to have something for nothing - or at least as little as possible - the vendors of Guaranteed Investment Products dangle a very tempting solution to this investment conundrum.
These investments are also promoted under the name of 'Structured Investments' and usually contain an array of derivatives - options in particular - that even investment professionals may find difficult to understand.
In addition, there is also substantial counterparty risk associated with the investment package and as the Credit Crunch has demonstrated the investment and banking professionals were found to be less than capable of correctly assessing the credit worthiness of even the most prominent financial service providers.