Today, TrueMark rolled out its third defined outcome ETF. The TrueShares Structured Outcome (September) ETF (SEPZ) is similar to the rest of the TrueShares defined outcome lineup in that its caps and buffers are not set in stone but fall within a range. It will reset on Sept. 1, 2021.
SEPZ comes with an expense ratio of 0.79% and lists on Cboe Global Markets, the parent company of ETF.com.
TrueMark’s twist on the defined outcome concept means that the buffer against downside performance covers a range—in this case, 8-12%—and there is no set cap on upside performance. The fund uses options contracts, including Flexible Exchange (FLEX) options, on the S&P 500 Price Index and the SPDR S&P 500 Trust ETF (SPY) to achieve its goal.
Rather than seeing their upside participation halted at a particular level, investors will simply see their percentage of participation in that upside reduced by a certain percentage due to the cost of the options contracts, the prospectus indicates.
“We do not pursue a hard cap on the upside. It’s not one-to-one participation, but there’s no limit,” said TrueMark CEO Michael Loukas when the first fund in the lineup made its debut.
Loukas notes certain key advantages to his firm’s take on defined outcome funds. One is that investors do not risk missing out on compounded returns to the same degree. In addition, it offers tighter correlation with the performance of the S&P 500 since there is no hard stop on how much upside the investment can achieve. According to Loukas, the level of participation in upside performance is expected to be 75% to 80%.
The TrueShares lineup is expected to eventually cover 12 months, so that there is a fund in the family resetting every month of the year. So far, there are similar TrueShares ETFs resetting at the beginning of July and August.
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