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First Trust launches buffer ETF referencing GLD


First Trust Advisors has launched the FT Cboe Vest Gold Strategy Quarterly Buffer ETF (BGLD) and the FT Cboe Vest Fund of Deep Buffer ETFs (BUFD).

BGLD seeks to provide investors with returns (before fees, expenses and taxes) that match those of the SPDR Gold Trust (GLD), up to a predetermined upside cap, while providing a buffer against GLD losses between -5 per cent and ­‑15 per cent (before fees, expenses and taxes), over the Target Outcome Period. Alternatively, BUFD is designed to provide equity investors with ongoing risk management strategy by investing substantially all of its assets in a portfolio of FT Cboe Vest US Equity Deep Buffer ETFs.

“Cboe Vest is pleased to work with First Trust to launch BGLD and BUFD, offering investors access to a growing arsenal of targeted risk management approaches. These new ETFs are the latest additions to the Target Outcome space that we pioneered in 2013,” says Karan Sood, CEO of Cboe Vest and portfolio manager for the funds.

BGLD is the latest addition to the Target Outcome Buffer Series ETFs, which are designed to help equity investors maintain a level of protection in down markets by seeking to provide a defined downside buffer, over a specified Target Outcome Period, while taking advantage of growth opportunities in up markets to a predetermined cap. BGLD will invest substantially all of its assets in US Treasury securities, cash, cash equivalents and in the shares of a wholly-owned subsidiary that holds Flexible Exchange Options (FLEX Options) that reference the performance of GLD. The cap and buffer for BGLD are reset at the end of each outcome period. 

“Historically, gold has a low correlation to stocks. Investing in gold may be of interest to investors seeking a potential hedge against inflation and currency risk. We believe this ETF, with its innovative and convenient access to gold as well as a protective 10 per cent buffer against GLD losses, will be an effective tool for investment professionals seeking to further diversify their clients’ portfolios,” says Ryan Issakainen, CFA, Senior Vice President, ETF Strategist at First Trust.

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