First Trust has announced the launch of the First Trust Vest U.S. Equity Buffer UCITS ETF – January (FJAN), on the London Stock Exchange, designed to offer investors the opportunity to participate in the growth potential of S&P 500 companies while mitigating some of the inherent volatility.
FJAN is the latest addition to First Trust’s expanding suite of Target Outcome ETFs in UCITS format. The firm writes that buffer ETFs seek to protect investors from a level of losses, while allowing participation in potential growth, up to a predefined cap.
This latest ETF joins the growing range of First Trust’s Target Outcome Investments, with firmwide assets under management in Target Outcome strategies exceeding USD25 billion as of end-September 2024.
Fund details
The Fund is actively managed and seeks to provide returns that match the price return of the S&P 500 up to a predetermined upside cap, while providing a 10 per cent downside cushion through a built-in buffer mechanism.
The outcome period runs for approximately one year, ending in January 2026, after which the cap and buffer are reset to prevailing market conditions.
FJAN has a perpetual structure and may be held indefinitely, providing a potential buy-and-hold investment opportunity.
The Fund is managed by First Trust Advisors L.P. and sub-advised by Vest Financial LLC, a pioneer of the buffer strategy and creator of the Target Outcome Investments framework.
“We are excited to expand our range by bringing another innovative buffer strategy to the European market,” says Rupert Haddon, Managing Director at First Trust Global Portfolios. “FJAN represents the first ETF in our quarterly series of scheduled UCITS ETFs for our S&P 500 Target Outcome 10 per cent buffer suite. In today’s volatile market environment, we believe FJAN offers a compelling solution for investors seeking exposure to leading S&P 500 companies while managing downside risk.”
Key features of FJAN
Market participation with reduced volatility: FJAN provides capped upside potential along with a built-in contractual buffer against the first 10 per cent of losses of the S&P 500 Index.
Smoother returns: The Fund aims to reduce peaks and troughs for a more stable growth trajectory, potentially preserving more capital during market shocks. This buffer mechanism may be particularly beneficial given the index’s high exposure to ‘MAG 7’ stocks.
Zero-Cost Buffer with Customised FLEX Options: FJAN uses FLexible EXchange Listed (FLEX) options, which are customised, exchange-traded contracts guaranteed for settlement by the Options Clearing Corporation.
Flexibility and Transparency: Investors can buy or sell shares at any time with no early exit penalties. All option components are transparently displayed in the ETF holdings, available on our website.
Lower Beta/Delta: The fund aims to have a lower beta/delta relative to the index, helping to cushion negative market movements.
FJAN is listed on the London Stock Exchange with a TER of 0.85 per cent.
