Buffered ETFs: Understanding Defined Outcome Funds Amidst Market Volatility

Rise in Buffered ETF Interest

• 📈 Buffered ETFs, also known as defined outcome ETFs, have seen a massive uptick in interest this year, comparable to the surge during the pandemic.
• 💡 This increased demand is driven by investors and advisors seeking protection during periods of market volatility and uncertainty.

Understanding Buffered ETFs

• 🎯 Buffered ETFs offer investors a portion of an asset's upside potential while providing protection from downside risk.
• 🧩 The core principle is that these funds are math-based, meaning they should work as intended if matched correctly with an investor's objectives and market outlook.
• ⚠️ It's crucial for investors to understand that there's no single 'right time' for these products; the key is matching the fund's objective with the investor's specific needs.

Volatility vs. Traditional Investing

• ⚖️ A common argument is that long-term investors might be better off with traditional, long-only investments, especially if market volatility is short-lived.
• 🚀 However, buffered ETFs aim to provide equity exposure while managing both upside capture and downside mitigation, addressing the full spectrum of volatility.
• 🚫 There's no free lunch in hedging; while buffered ETFs aim to mitigate downside, they typically do not capture 100% of the upside.

TrueMark's Approach to Buffered ETFs

• 💡 TrueMark Investments takes a more bullish approach compared to many peers in the buffered ETF market.
• 💰 Their strategy focuses on providing a percentage upside capture to an unlimited level over the investment period, rather than a one-to-one cap.
• 📊 An example product, APRZ, offers an 82-84% upside capture with a 10% downside buffer over 12 months, aiming to capture significant upside from large-cap equities.
• 📈 The firm believes in capturing chunky returns from the upside of good volatility, which is as important as mitigating the downside of bad volatility.