Mike Loukas, CEO of TrueMark Investments, sat down with Phon Vilayoune, founder and CIO of Veta Investment Partners for a crash course on buffered ETFs. Phon is an expert on portfolio construction and is one of the largest buffered ETF allocators in the country.
Mike and Phon discussed how buffered ETFs work, how they performed during COVID, the differences between capped and uncapped buffered ETFs, and the liquidity and transparency of buffered products. Phon also reveals how he builds buffered ETFs into a portfolio and which risk-return profiles he aims for in doing so.
Disclosures
There is no guarantee the funds will achieve their investment objectives. You may lose your entire investment, regardless of when you purchase shares, and even if you hold shares for an entire Outcome Period. The Fund may not be suitable for all investors. Full extent of Caps and Buffers only apply if held for stated Outcome Period and are not guaranteed. The Cap may increase or decrease and may vary significantly.
Source: Veta Investment Partners, “Possible Outcomes Across Four Market Scenarios – Ten Buffer” and “Possible Outcomes Across Four Market Scenarios – Twenty Buffer” The tables are provided for illustrative purposes only. Past performance does not guarantee future results.
“Uncapped vs. Hard Capped” – The chart assumes a 10% buffer. The TrueShare Structured Outcome ETFS seek to buffer the first 8-12% of S&P 500 Price Index losses over a 12-month period. For illustrative and discussion purposes only. The chart on the left illustrates the hypothetical returns that the TrueShares Structured Outcome ETFs seek to provide in certain illustrative scenarios, versus a hypothetical Fund employing a downside buffer, hard return capped strategy, for a shareholder that purchases Fund shares on the Initial Investment Day and holds such shares for the entire Investment Period. The returns shown in the charts are based on hypothetical performance of the reference benchmark, which for the TrueShares Structured Outcome ETF Funds is the S&P 500 Price Index. These charts do not take into account payment by the Funds of fees and expenses. There is no guarantee that the Funds will be successful in providing these investment outcomes for any Investment Period. Performance shown is hypothetical and based on certain assumptions. The chart on the left does not represent the actual performance of any TrueShares fund but does reflect the expected return pattern of the TrueShares Structured Outcome ETF Funds. A Fund’s actual performance for its options strategy will be determined by the options pricing available in the market at the time the Fund enters its option positions. In the event an investor purchases Shares after the date on which the options were entered into or sells Shares prior to the expiration of the options, the buffer that the Fund seeks to provide may not be available and there may be limited to no upside potential. The Fund does not provide principal protection and an investor may experience significant losses on its investment, including the loss of its entire investment. Upside participation over an investment period is subject to options pricing . Due to the cost of the options used by the fund, the correlation of the fund’s performance to that of the S&P 500 Price Index will be less than if the fund invested directly in the S&P 500 Price Index without using options, and could be substantially less. While upside participation is uncapped (no absolute upper limit), an investor in the TrueShares Structured Outcome ETFs should expect to experience a rate of market return less than 100% of actual broad market results. Each Fund’s current expected participation rate can be found at https://true-shares.com/products. The ETF is not designed to protect against declines of more than 8-12% in the level of the S&P 500 Price Index, and there can be no guarantee that the Fund will be successful in implementing the buffer options strategy to avoid the first 8-12%decline. Due to the cost of the options used by the Fund, the correlation of the ETF’s performance to that of the S&P 500 Price Index is expected to be less than if the ETF invested directly in the S&P 500 Price Index without using options, and could be substantially less. There is no guarantee that the ETF will be successful in providing these investment outcomes for any investment periods.
Source: Bloomberg, Veta Investment Partners, “2020 Comparison and Sensitivities,” “Options Values vs. Reference Asset: Downside Mark to Market, Then Reset in Buffer Zone,” “Options Values vs. Reference Asset: Upside Mark to Market, Then Reset at Cap,” Past performance does not guarantee future performance
Source: Bloomberg, Veta Investment Partners, TrueMark Investments, “TrueShares Quarterly Bear Hedge ETF,” “TrueShares Quarterly Bull Hedge ETF,” Past performance does not guarantee future performance. The illustrations above are displayed to illustrate the concepts of the strategies and do not show historical performance nor should be used as a basis for future performance.
Source: TrueMark Investments, “How Buffered Strategies Perform in Bull & Bear Markets.” Past performance does not guarantee future performance.
Source: ETF Action, TrueShares, “Fundamental Portfolio Solutions.” As of 6/30/2024. Past performance is not indicative of future results.
CONFIDENTIAL – FOR USE WITH INVESTMENT PROFESSIONALS ONLY. NOT FOR PUBLIC DISTRIBUTION.