First Trust Advisors has launched the Moderate Buffer ETF Series of Target Outcome ETFs: the FT Cboe Vest U.S. Equity Moderate Buffer ETF – January (Cboe: GJAN). The firm writes that the fund is the latest addition to First Trust’s suite of Buffer ETFs, which has over USD7.8 billion in total net assets for the product line as of 12/30/22 and is among the fastest growing in the outcome-oriented ETFs space.
The fund seeks an outcome that provides investors (before fees, expenses, and taxes) with returns that match the price return of the SPDR S&P 500 ETF Trust, up to a predetermined upside cap, while providing a buffer against potential SPY losses. The fund is managed and sub-advised by Cboe Vest Financial LLC using a “target outcome strategy” or pre-determined target investment outcome. Cboe Vest is the creator of Target Outcome Investments and manager of the longest running buffer strategy fund.
First Trust believes a buffer against a level of losses can help investors stay invested during volatile times. The fund offers a way to gain access to outcome-based investing—specifically to buffer against a level of downside risk while allowing growth to a maximum cap—eliminating bank credit risk in a convenient, flexible investment vehicle.
“It can be difficult for investors to remain disciplined in the face of increased market volatility, but exposure to equities may be critical for achieving their long-term goals. Target Outcome ETFs have grown increasingly popular among investment professionals because they are an effective tool to help clients gain exposure to stocks, while also mitigating downside risk,” says Ryan Issakainen, CFA, Senior Vice President, ETF Strategist at First Trust.
“Today’s launch of GJAN satisfies a demand from investors looking to fine-tune their risk management plan with a moderate buffer. Investors may consider using GJAN, which targets a 15 per cent buffer and participation in upside growth to a cap, alone or in combination with the FT Cboe Vest U.S. Equity Buffer ETFs (10 per cent buffer), or the FT Cboe Vest U.S. Equity Deep Buffer ETFs (-5 per cent to -30 per cent buffer), to dial in the desired level of downside buffer,” says Jeff Chang, President of Cboe Vest.
Karan Sood and Howard Rubin, of Cboe Vest, will serve as portfolio managers for the fund, the firm says. The portfolio managers are jointly and primarily responsible for the day-to-day management of the fund.
