'Boomer Candy,' or Buffered ETFs, See Rising Demand

Demand for buffered strategies rises with market volatility and investor uncertainty.

Jeff Benjamin

Wealth Management Editor

Sep 12, 2024

Reviewed by: etf.com Staff

Edited by: James Rubin

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Buffered ETFs have become the latest darling of financial advisors for their comfortable guardrails designed to keep nervous investors from fleeing toward the sidelines.

There’s a reason these strategies are sometimes called “Boomer Candy,” and for financial advisors they fit nicely into a toolbox of strategies because there’s just enough nuance to require the services of a trusted advisor.

Well, the good news and maybe bad news along those lines is that the category is fast evolving, and the latest developments could make these ETFs that tend to mature in 12-month cycles easier for casual investors to understand and use.

Buffered ETFs and Downside Protection

In addition to a spike in the classic buffer that offers varying degrees of downside protection in exchange for a cap on upside performance if held for the duration of the ETF, the growth is now occurring in the area of 100% downside protection.

That means no matter what the underlying index does over the full 12-month cycle of the ETF, the investor is guaranteed a return of principal. As expected, the tradeoff for such loss protection is a limit on upside performance.

While these buffered ETFs–also known as defined outcome ETFs–are designed to automatically roll into the next version once they mature, some investors and advisors might not want to deal with that wrinkle.

BUFR Assets Grow

And for proof of that appetite for ease of use, look no further than the FT Cboe Vest Fund of Buffer ETF (BUFR), which is a laddered fund of buffered ETFs that has swelled to more than $5 billion over the past four years.

That’s the kind of momentum Calamos Investments hopes to generate with its new Calamos Laddered S&P 500 Structured Alt Protection ETF (CPSL), which is a laddered portfolio of ETFs offering 100% downside protection.

There’s no reason to believe CPSL won’t take off in stride with BUFR and there’s also no reason to believe we won’t see more of this kind of innovation in the buffered ETF space.

The only question to ask at this point is, are these popular strategies that tamp down upside gains and are not cheap right for everyone?

Jeff Benjamin

| Contact: [email protected]

Jeff Benjamin is the wealth management editor at etf.com, responsible for coverage related to the financial planning industry. This includes writing, hosting podcasts, webinars, video interviews and presenting at in-person events.

Jeff is a veteran journalist with more than 30 years’ experience covering the financial markets. He has won more than two dozen national and regional awards for his reporting. He most recently worked as a senior columnist at InvestmentNews where he wrote about investment products and strategies, as well as the broader financial planning industry. Prior to that, Jeff worked as an analyst at Cerulli Associates where he researched and wrote reports on the alternative investments industry. Jeff also worked as a money management reporter at Dow Jones Newswires, where he covered the mutual fund industry.

Based in North Carolina, Jeff is a former Marine and has a bachelor’s degree in journalism from Central Michigan University.

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