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UBS Asset Management launches four Defensive Equity ETFs based on option selling strategies


UBS Asset Management (UBS AM) has launched four exchange traded funds tracking option-selling indices. The ETFs allow investors to take a more defensive view on US or European equities and are listed on the SIX Swiss exchange.For each target market, the S&P 500 and the EURO STOXX 50, UBS AM will offer both a Covered Call strategy and a Put Write strategy. The Covered Call combines a long position in the target index with weekly selling of call options. These aim to generate returns through income from premiums and reduce downside risk. Meanwhile, the Put Write strategy combines a cash exposure with weekly selling of put options, with the aim of generating an income from premiums while providing a cushion during market downturns. This approach has a lower average exposure to equity markets than the Covered Call strategy. The Defensive Equity ETFs track transparent, rules-based indices that are administered and published independently by Solactive.

These ETFs are suitable for investors looking for a more defensive equity position than outright beta. When compared to a long index position, the strategies historically perform best in ‘sideways’ or falling markets, as the premiums generated by selling options generate income to supplement returns or to offset losses. Adding these ETFs to a diversified portfolio can mitigate drawdown in a falling market, or increase returns when the market moves ‘sideways’ or within a range.
Clemens Reuter, Head of ETF & Passive Investment Specialists at UBS Asset Management, says: “Equity markets have been volatile over time and, as a result, may expose investors to significant downside risk. Systematically selling options on major stock indices is a way to generate income, reduce downside risk and benefit from that volatility. With this launch, UBS AM ETFs exemplifies its ability to provide innovative solutions to clients, allowing them to position themselves in any kind of market environment, including acting on market views other than outright beta.”

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